Equity multiplier = 1 + Debt−equity ratio
Equity multiplier = 1 + 1.41
Equity multiplier = 2.41
ROE = ROA × Equity multiplier
ROE = .0766 × 2.41
ROE = .1846, or 18.46%
Net income = ROE × Total equity
Net income = .1846 × $705,000
Net income = $130,147
Shelton Company has a debt-equity ratio of 1.41. Return on assets is 7.66 percent, and total...
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