Answer:
0.11%
Explanation:
Given that
Earning before interest and tax = $560,000
Interest = $336,000
The computation of company's return on equity is shown below:-
So, the Earning before tax
= $560,000 - $336,000
= $224,000
Tax = $224,000 × 30%
= $67,200
Earnings after interest and taxes = Earning before tax - Tax
= $224,000 - $67,200
= $156,800
Asset turnover ratio = total revenue ÷ total assets
3.4 = $8,000,000 ÷ total assets
Total assets = 2,352,941.18
Equity ratio = 1 - debt ratio
= 1 - 0.40
= 0.60
Total Equity = equity ratio × total assets
= 0.60 × 2,352,941.18
= 1,411,764.71
Return on Equity = Net income ÷ Equity
= $156,800 ÷ 1,411,764.71
= 0.11%
