A firm has a debt-to-total assets ratio of 60%, $300,000 in debt, and a net income...

  

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A firm has a debt-to-total assets ratio of 60%, $300,000 in debt, and a net income of $50,000. Calculate return on equity. Hint: this will be derived from the formulas: debt-to-total-assets total debt/total assets; return on assets = net income/total assets; and return on equity = return on assets/(1-debt/assets) (you must determine total assets, in order to determine return on assets, in order to determine return on equity). A firm has a debt-to-total assets ratio of 60%, $300,000 in debt, and a net income of $50,000. Calculate return on equity. Hint: this will be derived from the formulas: debt-to-total-assets total debt/total assets; return on assets = net income/total assets; and return on equity = return on assets/(1-debt/assets) (you must determine total assets, in order to determine return on assets, in order to determine return on equity).

Answer rating: 100% (QA)

To calculate the return on equity ROE we need to follow the ste... View the full answer