1. (a) An organization has $2 million in assets and an earnings beforeinterest and taxes (EBIT) profit of $500,000. The interest rate is 12%and the tax rate is 35%. It has financed its assets with no debt. Whatis its after interest and taxes profit? What is the ROE?Profit__________________ROE___________________(b) If the same organization in 1(a) now finances assets with 40%debt, what is the new after taxes and interest profit and the newROE?Profit __________________ROE____________________

1. (a) An organization has $2 million in assets and an earnings beforeinterest and taxes (EBIT) profit of $500,000. The interest rate is 12%and the tax rate is 35%. It has financed its assets with no debt. Whatis its after interest and taxes profit? What is the ROE?Profit________ROE_(b) If the same organization in 1(a) now finances assets with 40%debt, what is the new after taxes and interest profit and the newROE?Profit ROE__________

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 3P

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