Internet Corporation Has EBIT of $1 Million, 30% Debt in Their

question 92

Multiple Choice

Internet Corporation has EBIT of $1 million, 30% debt in their capital structure, and total capital of $10 million. Their tax rate is 35%. What is their return on capital employed (ROCE) ?

• A)6.5%
• B)10.0%
• C)33.33%
• D)21.67%

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Definitions:

Commercial Substance

A concept in accounting indicating that a transaction significantly affects the economic situation of the involved parties through a change in cash flows or the value of assets and liabilities.

Trade-In Allowance

The credit a buyer receives for a previous item towards the purchase of a new item.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense over its useful life.

Commercial Substance

A concept in accounting that indicates a transaction has significantly changed the economic conditions or the cash flows of an entity.