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problem 1: Humphrey Hotel’s operating income (EBIT) is $40 million. The company's times interest earned (TIE) ratio is 8.0, its tax rate is 40%, and its BEP (basic earning power) ratio is 10%. Determine the company's return on assets (ROA)?

a) 6.45%
b) 5.97%
c) 4.33%
d) 8.56%
e) 5.25%

problem 2: Suppose Meyer Corporation is 100% equity financed. Compute the return on equity (ROE), given the information:

  • Earnings before taxes $1,500  
  • Sales $5,000  
  • Dividend payout ratio 60%
  • Total assets turnover 2.0  
  • Tax rate 30%

a) 25%
b) 30%
c) 35%
d) 42%
e) 50%

problem 3: Moss Motors has $8 billion in assets, and its tax rate is 40%. The company's fundamental earning power (BEP) ratio is 12% and its return on assets (ROA) is 3%. Determine the Moss times interest earned (TIE) ratio?

a) 2.25
b) 1.71
c) 1.00
d) 1.33
e) 2.50

problem 4: Last year, Kansas Office Supply had $400,000 of net income on $24,000,000 of sales, its total assets turnover was 6.0, and the company's ROE was 15%. If the company just finances with debt and equity, determine the company's debt ratio?

a) 0.20
b) 0.30
c) 0.33
d) 0.60
e) 0.66

problem 5: Aaron Aviation recently reported the given information:

  • Net income $500,000  
  • ROA 10%
  • Interest expense $200,000  

The company's average tax rate is 40%. Determine the company's basic earning power (BEP)?

a) 14.12%
b) 16.67%
c) 17.33%
d) 20.67%
e) 22.50%

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M97089

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