If a Firm Has a Positive Tax Rate,a Positive Operating

question 23

Multiple Choice

If a firm has a positive tax rate,a positive operating ROA,and the interest rate on debt is the same as the operating ROA,then operating ROA will be _________.

• A) greater than zero but it is impossible to determine how operating ROA will compare to ROE
• B) equal to ROE
• C) greater than ROE
• D) less than ROE

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Definitions:

Equity Funds

Investment funds that primarily invest in stocks, aiming to provide investors with growth or income through dividends and capital gains.

Borrowed Funds

Money that an entity obtains from another party with the promise to return the principal amount along with interest.

Present Value

The present value of a sum of money or series of cash flows expected in the future, discounted at a certain rate of return.

Net Present Value

The discrepancy between incoming and outgoing cash flows' current worth over a certain timeframe, utilized in long-term investment planning to evaluate an investment's profit potential.