PROBLEM 8–1 As a financial analyst at a debt-rating agency, you are asked to analyze return on invested capital and asset utilization (turnover) measures for ZETA Corporation. Selected financial information for Years 5 and 6 of ZETA Corporation are reproduced in the Comprehensive Case chapter (see Case CC–2).

Required:

a. Compute the following return measures for Year 6 (assume a 50% tax rate):

(1) Return on net operating assets. (2) Return on common equity.

b. Disaggregate ROCE for Year 6. Comment on Zeta’s use of financial leverage.