The Total Assets of the Philbin Company on January 1

question 130

Multiple Choice

The total assets of the Philbin Company on January 1 were $2.3 million and on December 31 were $2.5 million. Net income was $188,000. Dividends totaled $75,000, interest expense totaled $70,000, and the tax rate was 30%. The return on total assets was closest to:

• A) 9.5%
• B) 6.8%
• C) 9.9%
• D) 10.8%

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Definitions:

Unlevered Cost

It involves the cost of funding a project or investment without any debt, reflecting the cost of capital that is equity financed.

Coupon

The yearly interest percentage paid on a bond, relative to its face value.

Tax Rate

The slice of income required as tax from businesses or individuals.

Coupon Rate

The annual interest rate paid by a bond's issuer to its holders, expressed as a percentage of the bond's face value.