Answer:
c. 13.59%
Explanation:
According to the DuPont equation, the ROE is determined by:
[tex]ROE = PM*AT*EM[/tex]
The company's profit margin (PM) is given by:
[tex]PM = \frac{\$315,000}{\$17,832}=0.0566[/tex]
The assets turnovet (AT) is:
[tex]AT=\frac{Sales}{Assets}=\frac{\$315,000}{\$210,000}=1.5[/tex]
The equity multiplier (EM) is given by:
[tex]EM = \frac{Assets}{Equity}\\\frac{Equity}{Assets}+\frac{Debt}{Assets}=1\\\frac{Equity}{Assets}=1-0.375=0.625\\EM=\frac{1}{0.625}=1.6[/tex]
The ROE is:
[tex]ROE= 0.0566*1.5*1.6\\ROE=0.1359 = 13.59\%[/tex]
