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Isolation Company has debt-equity ratio of 0.7. Return on Assets is 9% and total equity is...

Isolation Company has debt-equity ratio of 0.7. Return on Assets is 9% and total equity is 511,312. What is the Net Income

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Expert Solution

Required:

  • Debt equity ratio = Total liabilities / Total equity

0.7 = Total liabilities / 511,312

Total liabilities = 511,312 * 0.7

Total liabilities = 357,918

  • Total assets = Liabilities + Equity

= $357,918 + 511,312

= 869,230

  • Return on assets = Net income / Total assets

0.09 = Net income / 869,230

Net income = 0.09 * 869,230

Net income = 78,231.

Thus, net income = 78,231.


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