Business, 04.10.2020 05:01 ginareyes0423

Broward Manufacturing recently reported the following information: Net income $384,000 ROA 10% Interest expense $126,720 Accounts payable and accruals $1,000,000 Broward's tax rate is 25%. Broward finances with only debt and common equity, so it has no preferred stock. 40% of its total invested capital is debt, and 60% of its total invested capital is common equity. Calculate its basic earning power (BEP), its return on equity (ROE), and its return on invested capital (ROIC). Do not round intermediate calculations. Round your answers to two decimal places.

Answers: 3

Show answers

Answers

Answer from: mommer2019

a. Basic earning power (BEP) = 16.63%

b. Return on equity (ROE) = 26.67%

c. Return on invested capital (ROIC) = 16.87%

Explanation:

From the question, we have the following:

Net income = $384,000

ROA = Return on Asset = 10%

Interest expense = $126,720

Accounts payable and accruals = $1,000,000

Tax rate = 25% = 0.25

Common equity finance percentage = 60%

Debt finance percentage = 40%

From the above, we have:

Total assets = Net income / ROA = $384,000 / 10% = $3,840,000

Net total assets = Total assets - Accounts payable and accruals = $3,840,000 - $1,000,000 = $2,840,000

Common equity = Net total assets * Common equity finance percentage = $2,400,000 * 60% = $1,440,000

Debt = Net total assets * Debt finance percentage = $2,400,000 * 40% = $960,000

Earning before tax = Net income / (1 - Tax rate) = $384,000 / (1 - 0.25) = $384,000 / 0.75 = $512,000

Earning before interest and tax = EBIT = Earning before tax + Interest expense = $512,000 + $126,720 = $638,720

We then proceed as follows:

a. Calculation of basic earning power (BEP)

This can be calculated using the following formula:

BEP = EBIT / Total assets = $638,720 / $3,840,000 = 0.166333333333333 = 0.1663, or 16.63%

b. Calculation of return on equity (ROE)

This can be calculated using the following formula:

ROE = Net income / Common equity = $384,000 / $1,440,000 = 0.266666666666667 = 0.2667, or 26.67%.

c. Calculation of return on invested capital (ROIC)

This can be calculated using the following formula:

ROIC = (EBIT * (1 - Tax rate)) / (Common equity + Debt) = ($638,720 * (1 - 0.25)) / ($1,440,000 + $960,000) = ($638,720 * 0.75)) / $2,840,000 = $479,040 / $2,840,000 = 0.168676056338028 = 0.1687, or 16.87%

Answer from: Quest

answer; ///i believe the correct two answer are (1) paid in capital; and (2) earned capital; good luck

Answer from: Quest

i think the answer would be b hope this

Another question on Business

Business, 22.06.2019 01:00

Bond x is noncallable and has 20 years to maturity, a 7% annual coupon, and a $1,000 par value. your required return on bond x is 10%; if you buy it, you plan to hold it for 5 years. you (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 9.5%. how much should you be willing to pay for bond x today? (hint: you will need to know how much the bond will be worth at the end of 5 years.) do not round intermediate calculations. round your answer to the nearest cent.

Answers: 3

Answer

Business, 22.06.2019 08:10

Exercise 15-7 crawford corporation incurred the following transactions. 1. purchased raw materials on account $53,000. 2. raw materials of $45,200 were requisitioned to the factory. an analysis of the materials requisition slips indicated that $9,400 was classified as indirect materials. 3. factory labor costs incurred were $65,400, of which $50,200 pertained to factory wages payable and $15,200 pertained to employer payroll taxes payable. 4. time tickets indicated that $55,000 was direct labor and $10,400 was indirect labor. 5. manufacturing overhead costs incurred on account were $81,700. 6. depreciation on the company’s office building was $8,100. 7. manufacturing overhead was applied at the rate of 160% of direct labor cost. 8. goods costing $89,400 were completed and transferred to finished goods. 9. finished goods costing $76,000 to manufacture were sold on account for $105,100. journalize the transactions. (credit account titles are automatically indented when amount is entered. do not indent manually.) no. account titles and explanation debit credit (1) (2) (3) (4) (5) (6) (7) (8) (9) (to record the sale) (to record the cost of the sale) click if you would like to show work for this question: open show work

Answers: 1

Answer

Business, 22.06.2019 10:20

Sye chase started and operated a small family architectural firm in 2016. the firm was affected by two events: (1) chase provided $25,000 of services on account, and (2) he purchased $2,800 of supplies on account. there were $250 of supplies on hand as of december 31, 2016. record the two transactions in the accounts. record the required year-end adjusting entry to reflect the use of supplies and the required closing entries. post the entries in the t-accounts and prepare a post-closing trial balance.

Answers: 1

Answer

Business, 22.06.2019 17:30

Gary lives in an area that receives high rainfall and thunderstorms throughout the year. which device would be useful to him to maintain his computer?

Answers: 2

Answer

You know the right answer?

Broward Manufacturing recently reported the following information: Net income $384,000 ROA 10% Inter...

Questions