A firm has an ROA of 14%,a debt/equity ratio of 0.8,a tax rate of 35%,and the interest rate on the debt is 10%.The firm's ROE is ________.

Name: A firm has an ROA of 14%,a debt/equity ratio of 0.8,a tax rate of 35%,and the interest rate on the debt is 10%.The firm's ROE is ________.
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Question

Quizplus · Accepted Answer

ROE = ROA x (1 - D/E) x (1 - Tax Rate) + (ROA - (Interest Rate x Debt/Equity))

ROE = 0.14 x (1 - 0.8) x (1 - 0.35) + (0.14 - (0.1 x 0.8))

ROE = 0.1118 or 11.18%

A Firm Has an ROA of 14%,a Debt/equity Ratio of 0.8,a