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Jack Corp. has a profit margin of 5.9 percent, total asset turnover of 1.6, and ROE of 20.44 percent. What is this firms deb

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Answer #1

ROE=Profit margin*Total asset turnover*Equity multiplier

20.44=5.9*1.6*Equity multiplier

Equity multiplier=20.44/(5.9*1.6)

=2.16525424

Equity multiplier=Total assets/equity

Total assets=2.16525424*equity

Total assets=Total liabilities+Total equity

Hence debt=2.16525424*equity-equity

=1.16525424*equity

Hence debt-equity ratio=debt/equity

=1.17(Approx).

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