You are thinking of investing in Wave Runnerz, Inc. You have only the following information on the firm at year-end 2013: net income = $10 million, total debt = $65 million, and debt ratio = 35 percent. What is Wave Runnerz's ROE for 2013?
A)8.28 percent
B)15.38 percent
C)28.57 percent
D)43.96 percent

Question

Quizplus · Accepted Answer

ROE = Net Income / Shareholder's EquityShareholder's Equity = Total Assets - Total DebtTotal Assets = Total Debt / Debt RatioTotal Assets = $65 million / 0.35 = $185.71 millionShareholder's Equity = $185.71 million - $65 million = $120.71 millionROE = $10 million / $120.71 million = 8.28%

You Are Thinking of Investing in Wave Runnerz, Inc