Problem: Below is information for year ended 12/31/09 for Company A and Company B.
Company A Company B
Operating Inc. before $ 1000 $ 1000
Taxes and Interest
Interest Expense 400 0
Total assets - 12/31/09 10,000 10,000
Total debt 5,000 0
Equity 5,000 10,000
Tax Rate 40% 40%
Q1. Return on total assets for Company A and B for 2009 are (use NOPAT):
Company A Company B
A) 6% 6%
B) 8.4% 6%
C) 10% 10%
D) 14% 10%
Q2. ROE for Company A and B for 2009 are:
Company A Company B
A) 2.0% 2.0%
B) 3.6% 4.0%
C) 7.2% 6.0%
D) 8.6% 10%
Q3. Times interest earned ratio for Company A is:
A) 2.5
B) 2.6
C) 4.0
D) 4.2