Acrobat File Edit View E-Sign Window Help Q O Sun Feb 5 6:04 PM Financial Man Textbook!.pdf Home Tools Financial Man Tex... x ? 14 / 475 ROE and P/E ratios LL Search tools The purpose of this assignment is twofold: to give you practice using the DuPont equation to understand ROE; and (separately) to use company and industry price and earnings information to estimate stock price. For the latter, please use Yahoo!Finance (http://finance.yahoo.com). Create PDF Group Number Class meeting: Morning / Afternoon Combine Files ROE Problems Edit PDF 1. Imagine that you are a new employee in the financial analysis division of a [fictitious] company called FLIP finance enterprises [Ticker = FLIP]. The company had ROE last year Request E-signatures of only 2%, but management has developed a new operating plan designed to improve performance. The new plan calls for a debt ratio of 60%, which will result in interest Lu Fill & Sign charges of $300 million per year. Management also expects EBIT of $500 million on sales of $9 billion next year and it expects to have total asset turnover of 3.0 as well. Under these conditions, FLIP's tax rate will be 30%. What will be their ROE? Export PDF 2 . Continuing with the above information, assume now that FLIP's target ROE = 15%. Also assume that total assets, sales and net income all remain as above (these are big Organize Pages assumptions since leverage will be changing, but it simplifies your calculations). What everage (debt) ratio does FLIP need in order to reach target ROE? O La Send for Comments Comment Scan & OCR Protect More Tools C