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A formula in financial analysis is Return on equity=net profit margin×total asset turnover×equity multiplier

Math Oct 29, 2020

A formula in financial analysis is Return on equity=net profit margin×total asset turnover×equity multiplier. Suppose that the equity multiplier is fixed at 5.0?, but that the net profit margin is normally distributed with a mean of 4.1?% and a standard deviation of 0.4?%, and that the total asset turnover is normally distributed with a mean of 1.4 and a standard deviation of 0.3. Set up and conduct a sampling experiment to find the distribution of the return on equity. Show how the results as a histogram would help explain your analysis and conclusions.

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