Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $20 million in invested capital, has $3 million of EBIT, and is in the 25% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 55% and pays 12% interest on its debt, whereas LL has a 30% debt-to-capital ratio and pays only 8% interest on its debt. Neither firm uses preferred stock in its capital structure. Calculate the return on invested capital (ROIC) for each firm. Round your answers to two decimal places.
Answers (1)
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $20 million in ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
Suppose that Bob leaves a job that pays $50,000 per year in order to open a new sponge business. His insurance cost is $5,000, his material cost is $25,000, his lease payments are $10,000, and his sales revenue is $90,000. Bob's economic profit is:
Answers (1)
Kwik taxi service uses the units-of-activity method in computing depreciation on its taxicabs. Each cab is expected to be driven 140,000 miles. Taxi 10 cost $24,300 and is expected to have a salvage value of $700.
Answers (1)
Land $ 170,000 Equipment 66,000 Salaries Payable? Notes Payable 88,000 Supplies 14,000 Cash 26,000 Common Stock 100,000 Retained Earnings 40,000 Accounts Payable?
Answers (1)
Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland.
Answers (1)
How were corporations able to decrease costs and increase profits?
Answers (1)
New Questions in Business
Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and credited Interest Revenue. Therefore the bank reconciliation must have included an item that was: A.
Answers (2)
Which of the following is least likely to be a factor in developing a sales forecast? a. Number of salespeople employed by the firm's major competitors b. Geographic area in which the product is sold c. Entire product line d.
Answers (1)
Should you use a personal website, such as a blog, for research? Question 20 options: True False
Answers (1)
Calculating the number of periods. at 4.7 percent interest, how long does it take to double your money? to quadruple it?
Answers (1)
What tool does the US government use to keep track of inflation throughout the years
Answers (1)