Hernandez Corporation expects to have the following data during the coming year.What is Hernandez's expected ROE? $\begin{array}{lc}
\text { Assets } & \$ 200,000 \text { Interest rate }&8\% \
\text { D/A } & 65 \% \text { Tax rate } &25\%\
\text { EB IT } & \$ 25,000
\end{array}$
A) 15.64%
B) 16.43%
C) 17.25%
D) 18.11%
E) 19.01%

Question

Quizplus · Accepted Answer

Explanation:ROE = (Net Income / Shareholder's Equity) * 100Net Income = EBIT * (1 - Tax Rate) = $25,000 * (1 - 0.25) = $18,750Shareholder's Equity = Assets - Debt = $200,000 - ($200,000 * 0.65) = $70,000ROE = ($18,750 / $70,000) * 100 = 15.64%

Hernandez Corporation Expects to Have the Following Data During the Coming