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Homework answers / question archive / Franky’s Furniture has a taxable income of $197,400, ROA of 4

Franky’s Furniture has a taxable income of $197,400, ROA of 4

Finance

Franky’s Furniture has a taxable income of $197,400, ROA of 4.8 percent, a debt-equity ratio of 0.72, and a very smart CFO. What is the firm’s ROE?

 

A.

11.67 percent

 

B.

14.45 percent

 

C.

8.26 percent

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Return on equity will be calculated using following formula

= (Return on assets*(1+debt equity ratio)

= (.048*(1+.72)

= (.048*1.72)= 8.256% or 8.26% approximately

Correct answer is option (C) 8.26%

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