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A firm’s Revenues equals $2,000,000, Earnings After Taxes equals $250,000, Earnings Before Interest and Taxes equals...

A firm’s Revenues equals $2,000,000, Earnings After Taxes equals $250,000, Earnings Before Interest and Taxes equals $400,000, Total Assets equals $5,000,000, and Total Debt equals $3,000,000. What is this firm’s Return on Equity?

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Expert Solution

Total assets=Total liabilities+Total equity

Total equity=(5,000,000-3,000,000)=$2,000,000

ROE=Net income after taxes/Total equity

=(250,000/2,000,000)

=12.5%

jeff jeffy answered 2 years ago
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