Ask Question
12 November, 04:05

Universal Exports Inc. is considering a project that will require $700,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 35%. what will be the ROE (return on equity) for this project if it produces an EBIT (earnings before interest and taxes) of $140,000? 13.0% 9.8% 9.1%

+5
Answers (1)
  1. 12 November, 04:12
    0
    13%

    Explanation:

    Given that,

    Investment (100% equity) = $700,000

    EBIT = $140,000

    Tax rate = 35%

    Earnings after tax:

    = Investment (100% equity) + Earnings before interest and taxes - Tax (35%)

    = $700,000 + $140,000 - ($140,000 * 0.35)

    = $840,000 - $49,000

    = $91,000

    ROE = Earnings after tax : Investment

    = $91,000 : $700,000

    = 13%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Universal Exports Inc. is considering a project that will require $700,000 in assets. The project will be financed with 100% equity. The ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers