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uysha [10]
3 years ago
6

Galaxy Inc. has a tax burden ratio of .75, an interest burden of .6, a leverage ratio of 1.25, and a return on sales of 10%. Thi

s year the firm makes $2.40 in sales per dollar of assets. What is the firm's ROE?
a. 15%
b. 11.5%
c. 13.5%
d. 20%
Business
1 answer:
emmainna [20.7K]3 years ago
6 0

Answer:

Return on equity = 13.5 %

Explanation:

given data

tax burden ratio = 0.75

interest burden = 0.6

leverage ratio = 1.25

return on sales = 10%

sales assets = $2.40

to find out

What is the firm's ROE

solution

we get here Return on equity (ROE) that is express as

Return on equity = tax burden ratio ×leverage ratio × interest burden ratio × return on sale × sales      .......................1

put here value we get

Return on equity =  0.75  × 1.25  × 0.6  × 10%  × 2.40

Return on equity =  0.75  × 1.25  × 0.6  × 0.10  × 2.40

Return on equity = 0.135

Return on equity = 13.5 %

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Journal entries

                                                            Debit                          Credit

Treasury stock                                      325 million

Cash                                                                                        325 million

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Cash                                                        36 million

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