A corporation has 5 million in assets and 3 million
A corporation has $5 million in assets and $3 million in debt. During the year it takes in $750,000 in net revenue after deduction of all costs except for interest and incurs interest expenses of $300,000. The corporation pays an ATR of 33 percent on its profit.
a. Calculate the percentage return on equity after taxes for the corporation.
b. Calculate the percentage return on equity for the corporation if it had the same net revenue but no debt and therefore no interest expense for the year.
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