What value did you calculate?
How did you do the calculation?
I was unable to answer the question. The explanation for the question didn’t help me much. Hence asked it here.
7.5%
Do you know what the correct answer is supposed to be?
My guess would be 6.1%
X capitalizes and depreciates so charges 100K for the printer that year
Z expenses so charges 300K for the year
That’s a difference of 200K.
The tax rate is 25% so the difference in net income will be 150K which is 75% \times 200K
Z’s net income will be 750K-150K=600K
Ending equity will also be 150K lower =9,850K
return on equity =\frac{600}{9850}=0.06091 which is 6.1%