Calculate the rate of return on equity of nodebt

Assignment Help Financial Management

Reference no: EM13874701

a. Nodebt is a company with total assets of $100M and pays corporate taxes at the rate of 30%. Nodebt generates EBITs of $5M, $10M, $15M in a bad year, a normal year, and a good year respectively. Calculate the rate of return on equity of Nodebt in the three scenarios.

b. Some debt is an identical company except that $50M of its $100M total assets is financed with debt bearing an interest rate of 8%. Calculate the rate of return on equity of Some debt in the three scenarios of earnings.

c. Which company among the two has riskier equity to be invested in?

Reference no: EM13874701

Questions Cloud

Impact on price of shares and on wealth of its shareholders : Divido Corporation is an all-equity financed firm with a total market value of $100 million. The company holds $10 million in cash-equivalents and has $90 million in other assets. What will be the impact on the price of its shares and on the wealth o..

Inefficiencies of the turbine and the compressor : How do the inefficiencies of the turbine and the compressor affect

Calculate the average amount of time customer waits in line : A grocery store estimates that customers arrive at the rate of 15 per hour. The cashier can serve customers at a rate 20 per hour. Calculate the average amount of time customer waits in a line (in minutes)

Planning to save for retirement : You are planning to save for retirement over the next 15 years. To do this, you will invest $1,000 a month in a stock account and $700 a month in a bond account. The return of the stock account is expected to be 12 percent, and the bond account will ..

Calculate the rate of return on equity of nodebt : Nodebt is a company with total assets of $100M and pays corporate taxes at the rate of 30%. Nodebt generates EBITs of $5M, $10M, $15M in a bad year, a normal year, and a good year respectively. Calculate the rate of return on equity of Nodebt in the ..

Identify the various ways rhetorical appeals : identify the various ways rhetorical appeals

Evaluating new chemical compound used in manufacture : A Carlyle chemical is evaluating a new chemical compound used in the manufacture of a wide range of consumer products. The firm is concerned that inflation in the cost of raw materials will have an adverse effect on the projects cash flow. what recom..

Identify a position you might be interested in applying for : Online Job Search - Conduct an online job search and identify a position you might be interested in applying for. In your paper, discuss your online search and how you went about finding the position

How intel eventually able to virtually eliminate competition : Why would IBM insist on Intel second sourcing the 8086/8088 chip it chose to power the first generation of its PC? What are the sources of lock-in? How was Intel eventually able to virtually eliminate competition and profit from lock-in?

User Account

All Pages