1. Demonstrate what would happen to the 2014/15 Return on Equity and the Net Debt to Equity Ratios if your allocated company just prior to the end of the 2015 financial year raised an additional $50 million loan from the bank, which it invested entirely in new plant and equipment.
Assume that the immediate effect on sales and net profit was zero.
2014/15
ROE: 20,419/307,730
= 0.06
NTDR:
117,137/313,314
=37.39%
2. Demonstrate what would happen to the 2014/15 Return on Equity and the Net Debt to Equity Ratios if your allocated company just prior to the end of the 2015 financial year instead of raising the additional loan raised an additional $50 million through the sale of new shares to the public, which it used to pay for the new plant and equipment. Assume that the immediate effect on sales and net profit was zero.
2009/10
ROE:
9,387/185,906.5
= 0.50
NTDR: 80,287/239,127= 33.58%I am really struggling to find out how to work out these answers, any help would be so great!!