Central City Construction (CCC)_ROE_Debt Versus Equity

profileaccountguru
 (Not rated)
 (Not rated)
Chat

 

Central City Construction (CCC) needs $1 million of assets to get started, and it expects to have a basis earning power ratio of 20%. CCC will own no securities, so all of it income will be operating income. If it so chooses, CCC can finance up to 50% of its assets with debt, which will have an 8% interest rate. Assuming a 40% tax rate on all taxable income , what is the difference between CCC's expected ROE if it finances with 50% debt versus its expected ROE if it finances entirely with common stock?

    • 7 years ago
    Central City Construction (CCC)_ROE_Debt Versus Equity
    NOT RATED

    Purchase the answer to view it

    blurred-text
    • attachment
      central_city_construction_ccc_roe_debt_versus_equity.xlsx