Len and Joan intend to invest $300,000 in their CompuTech Sales and Service retail store. Their financial projections show that during the first year of operations, CompuTech will generate $30,000 in profit, with substantial increases in the following years. To finance their business, Len and Joan will need $100,000 in loans (short-term and long-term borrowings) from the bank at 5% (after taxes). The other $100,000 will come from their savings. The Millers are currently earning 7% (after taxes) on their savings.Remember the Millers are not financing the business only from borrowing but also by using money from their savings.

Questions:

Calculate CompuTech's ROA?

Calculate its cost of financing?

Answer rating: 100% (QA)

To calculate CompuTechs Return on Assets ROA and cost of financing we need to consider the profit ge... View the full answer