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The Records of Sage Company Showed the Following *10,000 Shares Outstanding; Current Market Price, $30 **Including Income Tax;

Question 145

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The records of Sage Company showed the following:  Assets $230,000 Liabilities 130,000 Shareholders’ equity* 100,000 Revenues $100,000 Expenses (81,000) Interest expense (2,000) Profit $17,000\begin{array} { | l | r | } \hline \text { Assets } & \$ 230,000 \\\hline \text { Liabilities } & 130,000 \\\hline \text { Shareholders' equity* } & 100,000 \\\hline \text { Revenues } & \$ 100,000 \\\hline \text { Expenses } ^ { * * } & ( 81,000 ) \\\hline \text { Interest expense } & ( 2,000 ) \\\hline \text { Profit } & \$ 17,000 \\\hline\end{array} *10,000 shares outstanding; current market price, $30 **Including income tax; income tax rate, 30% (1) The return on assets is %(2) The return on equity is %.(3) The financial leverage factor is %(4) Is the financial leverage positive or negative? \begin{array}{|l|l|}\hline(1) & \text { The return on assets is } \underline{\quad\quad}\%\\\hline(2) & \text { The return on equity is } \underline{\quad\quad}\% . \\\hline(3) & \text { The financial leverage factor is } \underline{\quad\quad}\%\\\hline(4) & \text { Is the financial leverage positive or negative? } \underline{\quad\quad}\\\hline\end{array}

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(1) $17,000 + ($2,000 × .70)/$...

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