A firm has a debt to equity ratio of 50%, debt of $300,000, and net income of $90,000. The return on equity is: a. 60% b. 15% c. 30% d. Insufficient information e. None of the above.
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- A firm has a profit margin of 35.92, return on assets of 25.86 and a debt to equity ratio of 1.489. What is the firm's return on equity (ROE)? 0.96% 64.37% O None of these options are correct O 23.12% O 13.83%Gates Appliances has a return-on-assets (investment) ratio of 20 percent. a. If the debt-to-total-assets ratio is 25 percent, what is the return on equity? (Input your answer as a percent rounded to 2 decima) places.) b. If the firm had no debt, what would the return-on-equity ratio be? (Input your answer as a percent rounded to 2 decimal places.)General accounting
- A firm has a debt-equity ratio of .52, a pretax cost of debt of 6.5 percent, and a required return on assets of 12 percent. Ignoring taxes, what is the cost of equity? Multiple Choice 12.86 percent 14.36 percent 14.86 percent 20.36 percent 12.00 percentWhich one of the following statements is correct? Multiple Choice If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0. Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5. The debt-equity ratio can be computed as 1 plus the equity multiplier. An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity. An increase in the depreciation expense will not affect the cash coverage ratio. 1You have the following information on a company on which to base your calculations and discussion: Cost of equity capital (rE) = 18.55% Cost of debt (rD) = 7.85% Expected market premium (rM –rF) = 8.35% Risk-free rate (rF) = 5.95% Inflation = 0% Corporate tax rate (TC) = 35% Current long-term and target debt-equity ratio (D:E) = 2:5 a. What are the equity beta (bE) and debt beta (bD) of the firm described above?[Hint: Assume that the above costs of capital have been generated by an appropriate equilibrium model.] b. What is the weighted-average cost of capital (WACC) for this firm at the current debt-equity ratio? c. What would the company’s cost of equity capital become if you unlevered the capital structure (i.e. reduced gearing until there is no debt)

