Return on equity (ROE) can be estimated using financial statements (book value) or financial market data (market value). The book value of ROE over an accounting period is earnings after tax divided by owners’ equity. The market value of ROE is the return that an investor would have experienced during the same period. It is the difference in share price plus dividend paid during the period divided by the share price at the beginning of the period. Why are the two ratios different? If the market ROE is more relevant to any investor, what is the use of the book ROE?
Answer to relevant Questionsa. 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 ...Mars Electronics is distributor for the Global Electric Company (GEC), a large manufacturer of electrical and electronics products for consumer and institutional markets. On the next page are the semiannual financial ...Suppose you have decided to set up a personal pension fund for your retirement. You just turned twenty-five. You expect to retire at age sixty-five and believe it is reasonable to count on living at least twenty years after ...The following chart plots the net present value (NPV) of projects A and B at different discount rates. The projects have similar risk and are mutually exclusive. a. What is the significance of the point on the graph where ...The Clampton Company is considering the purchase of a new machine to perform operations currently being performed on different, less efficient equipment. The purchase price is $110,000, delivered and installed. A Clampton ...
Post your question