Your sister is thinking about starting a new business.The company would require $375,000 of assets,and it would be financed entirely with common stock.She will go forward only if she thinks the firm can provide a 13.5% return on the invested capital,which means that the firm must have an ROE of 13.5%.How much net income must be expected to warrant starting the business?
A)$41,234
B)$43,405
C)$45,689
D)$48,094
E)$50,625

Question

Quizplus · Accepted Answer

To find the required net income, multiply the required ROE (13.5%) by the total assets ($375,000). This gives $375,000 * 0.135 = $50,625.

Your Sister Is Thinking About Starting a New Business