Solution 3 Capital = Total Assets – Current Liabilities = $159,000 - $48,000 = $111,000 Income before interest and after taxes = EBIT x (1- Tax rate) = 26000 x (1-.4167) = $15,165.80 Return on capital(2008) = Income before interest and after taxes/ Capital = $15,165.80 / $111,000 = 13.66% Return on capital (2005) = (10000 x (1-.4444)/ (93000 -21000) = 5555.55/72000 = 7.71% Improvement = 13.66%-7.71% = 5.94%.