Monita Hussain has a business in which she's invested $260000 of his own money, which is...

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Monita Hussain has a business in which she's invested $260000 of his own money, which is the firm's only capital. (There are no other equity investors and no debt.) In a recent year, on equity of 7.69% ($20000/$260000). What will the firm's return on equity be next year if net income from business operations remains the same but it borrows $140000 returning the same amount to Jake from the equity account if (Round your answer to two decimal places.): the firm had net income of $20000 for a return a. The after-tax interest rate is 6%. % b. The after-tax interest rate is 10%. % c. Comment on the difference between the results. Leverage (improves or decreases) ROE if the firm's underlying return on capital is higher than the rate it pays for borrowed money. But if debt costs more than the company earns with the borrowed money, leverage makes ROE (better or worse). Monita Hussain has a business in which she's invested $260000 of his own money, which is the firm's only capital. (There are no other equity investors and no debt.) In a recent year, on equity of 7.69% ($20000/$260000). What will the firm's return on equity be next year if net income from business operations remains the same but it borrows $140000 returning the same amount to Jake from the equity account if (Round your answer to two decimal places.): the firm had net income of $20000 for a return a. The after-tax interest rate is 6%. % b. The after-tax interest rate is 10%. % c. Comment on the difference between the results. Leverage (improves or decreases) ROE if the firm's underlying return on capital is higher than the rate it pays for borrowed money. But if debt costs more than the company earns with the borrowed money, leverage makes ROE (better or worse).

Answer rating: 100% (QA)

Next years Net income 20000 Total Equity before Debt 260000 Total Equity after 140000 ... View the full answer