Answer :
Answer:
Explanation:
a) No Equity Inc:
Net Income = (EBIT – Interest) * (1-T) = (22.5– 79 * 0.10) * (1-0.30)
= 14.6 * 0.7 = 10.22
Return on assets = Net Income / Total Assets = 10.22 / 80 = 12.775%
b) No Debt Inc:
Net Income = (EBIT – Interest) * (1-T) = (22.5 – 0) * (1-0.30)
= 22.5 * 0.7 = 6.75
Return on assets = Net Income / Total Assets = 6.75 / 40 = 16.875%