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Calculate the firm''s after-tax return on equity roe

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Reference no: EM131142005

Zheng Sen's Chinese Take-Out had earnings before interest and taxes of $4 million last year. The firm has a marginal tax rate of 40 percent and currently has the following capital structure:

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Calculate the firm's after-tax return on equity (ROE) and earnings per share EPS)

If the firm retires $4 million of preferred stock using the proceeds from an equal increase in long-term debt, what would have been the after-tax ROE and EPS?

If the firm retires $4 million of preferred stock using the proceeds from the sale of 500,000 shares of common stock, what would have been the after-tax ROE andEPS?

Reference no: EM131142005

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