contestada

A firm has an ROE of 3%, a debt/equity ratio of .5. a tax rate of 35%, and pays an interest rate of 6% on its debt. What is its operating ROA?ROE= [1 - tax rate] (ROA + ROA - Interest Rate) Debt/ Equit]Can someone please show me the step by step algerbic explanation please?

Respuesta :

Answer:

5.07%

Explanation:

The equation is presented below:

ROE = [1 - tax rate] × {ROA + (ROA - Interest Rate) × Debt ÷ Equity}

3% = [1 - 0.35] × {ROA + (ROA - 0.06) × 0.5}

3% = 0.65 × (ROA + 0.5 ROA - 0.03)

0.03 ÷ 0.65 = 1.5 × ROA - 0.03

0.0461 + 0.03 = 1.5 × ROA

ROA = 0.0761 ÷ 1.5

So after solving this,

ROA would be

= 5.07%

We simply put the values on the above equation

         

Otras preguntas