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Question
Greg is interested in investing in a small company, and he thinks Allen, Co. might be a good investment. He has been given the following information and would like to know the return on stockholder's equity. Assume Allen's marginal tax rate is 40%.| Earning before taxes | $3 million | |
| Net profit margin | 3.6% | |
| Total liabilities | $15.0 million | |
| Total stockholder's equity | $10.0 million | |
a. 12%
b. 20%
c. 15%
d. 18%
Answer
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Related questions
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Q:
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Q:
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b. relevant information is readily available for individuals and is costless to obtain
c. all investors can borrow and lend at the same rate
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Q:
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b. the value of the firm is independent of its capital structure in perfect capital markets with no income taxes
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Q:
Kenzel has an EPS of $4.20 and sales are $9 million. If the firm has a degree of operating leverage of 4.0 and a degree of financial leverage of 5.2, forecast EPS if the firm expects a 4% sales decline.
a. $0.71
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c. $4.03
d. $3.33