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Blemker Corporation has $500 million of total assets, its basic earning power is 15%, and it currently has no debt in its capital structure. The CFO is contemplating a recapitalization where it will issue debt at a cost of 10% and use the proceeds to buy back shares of the company

Posted Aug 26 2019

Answered on Aug 27 2019
Blemker Corporation has $500 million in total assets, its basic earning power is 15% and currently has no debt in its capital structure. The CFO is considering recapitalization where it will issue debt at a cost of 10% and use the proceeds to buy back shares of the company's common stock, paying the book value. If the company proceeds with the recapitalization, its operating income, total assets, and tax rate will remain unchanged. Which of the following is most likely to occur as a result of the recapitalization? Answer The ROA would increase . The ROA would remain unchanged. The basic earning power ratio would decrease. The basic earning power ratio would rise. The ROE would increase.-correct answer

Caterpillar, Inc CNH Global
2014 2013 2012 2013
ROE 18.94% 20.51% 35.87% 20.68%

I have performed DuPont analysis on Caterpillar Inc. and its closest competitor, CNH Global. Your analysis should include a discussion of the strengths or weaknesses revealed in each ratio. Please analyze the ROE. (please do not copy any info from google or investopia).

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