At the End of Year 1 Firm XYZ Has TA=$325

question 12

Short Answer

At the end of year 1 firm XYZ has TA=$325 bn., and it is financed with debt with a book value of $125 mn.and equity with a book value of $200 mn.The firm must pay 10% interest annually on its debt.In year 2, the firm had a net income of $55 mn.The firm's year 2 ROA was ___(i)___, and the firm's year 2 ROE was ___(ii)___.
$\begin{array}{ll}&\mathrm{ROA} & \mathrm{ROE} \\a.&12.0 \% & 27.5 \% \\b.&12.0 \% & 17.1 \% \\c.&16.9 \% & 27.5 \% \\d.&16.9 \% & 17.1 \%\end{array}$

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