a. If a firm has a return on equity (ROE) of 15 percent, a financial multiplier of
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a. If a firm has a return on equity (ROE) of 15 percent, a financial multiplier of 2, and does not pay any tax, what is its return on invested capital before tax?
b. If a firm has an ROE of 15 percent, a financial cost effect of 0.9, and an pre-tax ROIC of 10 percent, what is its debt-to-equity ratio (total debt divided by owners’ equity)? Assume that the firm does not pay any tax.
c. Under what condition(s) can a firm have, at the same time, a negative pre-tax ROIC and a positive ROE?
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a 75 percent 075 X 2 15 or 15 percent b The financial structure effect is 167 10 X 9 ...View the full answer
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Related Book For 
Finance for Executives Managing for Value Creation
ISBN: 978-0538751346
4th edition
Authors: Gabriel Hawawini, Claude Viallet
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