Answer:
Roland & Company expect its ROE to be 26,67%
Explanation:
In order To calculate Return on Equity we need first ti calculate the following:
First taking Total asset Turnover ratio = Sales / Total Assets = 3.0, putting in values we get 3.0 = 270,000 / Total Assets
Total Assets = 270,000 / 3.0
Total Assets = 90,000
Secondly
Total liabilities / Total Assets = 55% debt radio, hence 55% = Total liabilities / 90,000
Total liabilities = 55%*90,000
Total liabilities = 49,500
The next step is to calculate the Shareholders equity which is Total Assets - Total liabilities
Sharholders equity = 90,000-49,500 = 40,500
Now we can calculate the net income
Net income = EBIT- Interest - tax
Net Income = 25,000-7000 = 18,000 - (1-40%) = 10,800
Net income = 10,800
Finally, we can calcuate theReturn on Equity = Net Income / shareholders equity
ROE = 10,800 / 40,500
ROE = 26.67%
