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mote1985 [20]
3 years ago
14

ME Company has a debt-equity ratio of .57. Return on assets is 7.9 percent, and total equity is $620,000. a. What is the equity

multiplier?
Business
1 answer:
Lera25 [3.4K]3 years ago
5 0

Answer:

8.06

Explanation

  • Debt equity ratio=Debt÷ Equity
  • Debt÷Equity=0.57
  • Equity=620,000 in this question
  • Debt=620,000*0.57=353,400.
  • Assets=Debt+Equity
  • Assets in this case=353,400+620,000=973,400
  • Return on asset=Profit for the year=7.9%*973,400=76898.6
  • Equity Multiplier=Total Equity/Profit for the year
  • Equity Multiplier=620,000/76898.6=8.06

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