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You have the following information on Wilma and Fred Stones farming operation: Assets $1,600,000: Liabilities: $600,000 Interest Rate on debt: 9% Average Tax Rate 20%

You have the following information on Wilma and Fred Stones farming operation:

Assets $1,600,000: Liabilities: $600,000 Interest Rate on debt: 9%

Average Tax Rate 20% Consumption Rate 45% Equity Growth Rate 6.8%

What is the rate of return on assets for the scenario presented here? What would the rate of return be if liabilities were $1,000,000?

Explain any difference you observe.

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