Gates Appliances has a return-on-assets (investment) ratio of 18 percent. a. If the debt-to-total-assets ratio...
Gates Appliances has a return-on-assets (investment) ratio of 18
percent.
a. If the debt-to-total-assets ratio is 25
percent, what is the return on equity? (Input your answer
as a percent rounded to 2 decimal places.)
b. If the firm had no debt, what would the
return-on-equity ratio be? (Input your answer as a percent
rounded to 2 decimal places.)
Homework Answers
a. Return on equity = Return on assets / (1 - Debt/Assets)
Return on equity = 0.18 / (1 - 0.25)
Return on equity = 0.2400 or 24.00%
b. Return on equity = 18.00%
Add Answer to:
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