1- Leverage and ROE Firm A uses debt and has $540 in equity. Firm B does not use debt and has $1,050 in equity. Both firms pay a 34% tax rate and both firms have EBIT of $52. Firm A has interest expense of $32. There are no other expenses. If EBIT doubles for both firms ROE for Firm A will be_______; ROE for Firm B will be _______.
10.30%; 6.24%
8.40%; 6.04%
9.50%; 7.34%
8.80%; 6.54%
2-ROE A firm has net income of $27 million, assets of $233 million and liabilities of $60 million. What is the firm's ROE?
11.59%
15.14%
15.61%
45.00%
3-A firm has an ROE of 3%, a debt/equity ratio of 0.3, a tax rate of 40%, and pays an interest rate of 5% on its debt. What is its operating ROA? (Do not round intermediate calculations.Round your answer to 2 decimal places.)