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kakasveta [241]
3 years ago
9

7. DuPont Identity. X Corp. has net income of $20 million, Sales of $100 million, asset turnover of .6, and debt-equity ratio of

40%. a. What is its return on equity? b. If X increases its debt-equity ratio to 60%, what happens to its return on equity?
Business
1 answer:
goldfiish [28.3K]3 years ago
7 0

Answer:

Explanation:

Net Income = 20m

Sales = 100m

Debt-equity ration = 40%

Asset turnover = 0.60

A)

Profit Margin = Net Income / Sales  = $20 million / $100 million  = 20%

Equity Multiplier = 1 + Debt-Equity Ratio  = 1 + 0.40  = 1.40

Return on Equity = Profit Margin * Asset Turnover * Equity Multiplier               = 20% * 0.60 * 1.40  = 16.80%

B)

Debt-equity ratio = 60%

Equity Multiplier = 1 + Debt-Equity Ratio  = 1 + 0.60  = 1.60

Return on Equity = Profit Margin * Asset Turnover * Equity Multiplier  = 20% * 0.60 * 1.60 = 19.20%

As calculations provide, if debt-equity ratio increases to 60%, Return on equity will increase by 2.40% (19.20% - 16.80%)

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Cole Co. began constructing a building for its own use in January 2016. During 2016, Cole incurred interest of $50,000 on specif
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Answer:

$40,000

Explanation:

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4 0
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According to keynes what should the government do to improve economic conditions during a recession? group of answer choices
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3 0
2 years ago
James Bright's company seeks markets all over the world and attempts to sell products that are a result of planned production fo
drek231 [11]

Answer: (D)  International marketing

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 The international marketing is the process of satisfying the actual needs and the requirement of the different types of people inside and also outside the national borders.

The following are the various types of international marketing benefits are:

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 According to the given question, the international marketing is one of the stage which best characterized the Mr.Bright company in the market. Therefore, Option (D) is correct.

4 0
3 years ago
What type of competition exists in the aviation sector? And why?
shtirl [24]

Answer:

Oligopoly market structure

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