Your sister is thinking about starting a new business.The company would require $425,000 of assets,and it would be financed entirely with common stock.She will go forward only if she thinks the firm can provide a 13.5% return on the invested capital,which means that the firm must have an ROE of 13.5%.How much net income must be expected to warrant starting the business?

Question

Quizplus · Accepted Answer

To find the required net income, multiply the required ROE (13.5%) by the total assets ($425,000): 0.135 * 425,000 = $57,375.

Your Sister Is Thinking About Starting a New Business