Homework Answers
a. ROA = Asset turnover × Operating profit margin
ROA= 7% × 4= 28%
b.Net Income = EBIT - Interest - Taxes =21000-8200-8200 =4600
Note : both interest and taxes same as per mentioned in question.
Debt equity ratio 1 , which means debt equal to equity so that Assets are two times equity .
ROE= Assets /Equity × ROA × Net income / after tax operating income
Tax rate = Taxes /EBT
Tax rate = 8200/( 2100-8200)= 64%
ROE= 2/1 × 28% × 4600/4600+ 8200 (1-0.64)
ROE= 2×28% × 4600/7552= 0.3411 or 34%
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