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Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation....

Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 7 percent and its return on assets (investment) is 13 percent. What is its assets turnover? (Round your answer to 2 decimal places.) b. If the Butters Corporation has a debt-to-total-assets ratio of 40.00 percent, what would the firm’s return on equity be? (Input your answer as a percent rounded to 2 decimal places.) c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 30.00 percent? (Input your answer as a percent rounded to 2 decimal places.)

Solutions

Expert Solution

Du Pont framwork suggest following equation as decomposition of ROE ( Return on Equity):

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago
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