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A firm has a tax burden ratio of 0.7, a leverage ratio of 1.4, an interest...

A firm has a tax burden ratio of 0.7, a leverage ratio of 1.4, an interest burden of 0.4, and a return on sales of 13%. The firm generates $2.50 in sales per dollar of assets. What is the firm's ROE? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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Answer #1

Return on sales ratio = Operating Profit/Net sales

0.13 = Operating Profit/2.50

Operating Profit = $0.325

ROE = Tax burden*leverage ratio* Interest burden* Operating Profit

ROE = 0.7*1.4*0.4*0.325

ROE=12.74%

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