At the end of year 1 firm XYZ has TA=$325 bn., and it is financed with debt with a book value of $125 mn.and equity with a book value of $200 mn.The firm must pay 10% interest annually on its debt.In year 2, the firm had a net income of $55 mn.The firm's year 2 ROA was ___(i)___, and the firm's year 2 ROE was ___(ii)___.
$\begin{array}{ll}
&\mathrm{ROA} & \mathrm{ROE} \
a.&12.0 \% & 27.5 \% \
b.&12.0 \% & 17.1 \% \
c.&16.9 \% & 27.5 \% \
d.&16.9 \% & 17.1 \%
\end{array}$

Question

At the end of year 1 firm XYZ has TA=$325 bn., and it is financed with debt with a book value of $125 mn.and equity with a book value of $200 mn.The firm must pay 10% interest annually on its debt.In year 2, the firm had a net income of $55 mn.The firm's year 2 ROA was ___(i)___, and the firm's year 2 ROE was ___(ii)___. 
$\begin{array}{ll}
&\mathrm{ROA} & \mathrm{ROE} \
a.&12.0 \% & 27.5 \% \
b.&12.0 \% & 17.1 \% \
c.&16.9 \% & 27.5 \% \
d.&16.9 \% & 17.1 \%
\end{array}$

Quizplus · Accepted Answer

The Answer of At the end of year 1 firm XYZ has TA=$325 bn., and it is financed with debt with a book value of $125 mn.and equity with a book value of $200 mn.The firm must pay 10% interest annually on its debt.In year 2, the firm had a net income of $55 mn.The firm's year 2 ROA was ___(i)___, and the firm's year 2 ROE was ___(ii)___. 
$\begin{array}{ll}
&\mathrm{ROA} & \mathrm{ROE} \
a.&12.0 \% & 27.5 \% \
b.&12.0 \% & 17.1 \% \
c.&16.9 \% & 27.5 \% \
d.&16.9 \% & 17.1 \%
\end{array}$

At the End of Year 1 Firm XYZ Has TA=$325