What is the return on equity for a firm with 15% return on assets,10% return on debt,and a .75 debt-equity ratio?
A) 18.75%
B) 20.00%
C) 23.75%
D) 26.25%

Question

Quizplus · Accepted Answer

The return on equity is calculated as the return on assets multiplied by the equity multiplier. The equity multiplier is calculated as 1 divided by the debt-equity ratio. In this case, the return on equity is 15% * (1 / 0.75) = 20%.

What Is the Return on Equity for a Firm with 15