Q8.The following table describes certain financial results for three companies during 20X2,20X3 and 20X4:[16Marks]
3
Income Before Interest and Taxes
20X2
Oneida Company Thebes Company Albany Company
$50,000 50,000 50,000
20X3
Oneida Company Thebes Company Albany Company
$30,000 30,000 30,000
20X4
Oneida Company Thebes Company Albany Company
$15,000 15,000 15,000
Each company has total assets of S250,000 in each year. Oneida Company has no debt, Thebes Company has $100,000 of debt at an interest rate of 10%,and Albany Company has S150,000 of debt at a 14% interest rate. Thebes and Albany have no other debt or liabilities. Assume no taxes. For each company,and for each year,determine
l.The rate of return on total assets. 2.The rate of return on stockholders'equity 3. For each company, and for each year, state whether the company's use of debt leverage is favorable(F),unfavorable(U), or not applicable (NA) to shareholders.
To answer the above questions tabulate your final answers in the given format: 20X2 20X3 20X4 ROA(%) ROE% ROA(%) ROE (%) ROA(%) ROE (%) Oneida Co Thebes Co. Albany Co. Analysis 20X2 20X3 20X4 Oneida Co F or U or NA F or U or NA F or Uor NA Thebes Co. F or U or NA F or Uor NA F orU or NA Albany Co. F or U or NA F or U or NA F or U or NA