Question: A formula in financial analysis is: Return on equity = net profit margin * total asset turnover * equity multiplier. Suppose that the equity multiplier

A formula in financial analysis is:

Return on equity = net profit margin * total asset turnover * equity multiplier.

Suppose that the equity multiplier is fixed at 4.0, but that the net profit margin is normally distributed with a mean of 3.8% and a standard deviation of 0.4%, and that the total asset turnover is normally distributed with a mean of 1.5 and a standard deviation of 0.2. Set up and conduct a sampling experiment to find the distribution of the return on equity. Show your results as a histogram to help explain your analysis and conclusions. Use the empirical rules to predict the return on equity.

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Financial Analysis NOTE AS A SAMPLING EXPERIMENT THE RESULTS WILL VARY SLIGHTLY FOR EACH STUDENT Equity Multiplier 400 Net Profit Margin Asset turnover MEAN 380 150 SD 040 020 Net Profit Margin Total ... View full answer

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