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14 March, 22:04

Bamp; C Co. has net income of $48,200, sales of $947,100, a capital intensity ratio of. 87, and an equity multiplier of 1.53. What is the return on equity?6.77 percent5.93 percent8.95 percent12.21 percent14.09 percent

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  1. 15 March, 01:51
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    Option (C) is correct.

    Explanation:

    Return on Equity (ROE) = ?

    Using DuPont Model, the Return on Equity (ROE) is calculated by using the following formula:

    Return on Equity (ROE):

    = Net Profit Margin * Total Asset Turnover * Equity Multiplier

    = [Net Income : Sales] * [1 : Capital Intensity Ratio] * Equity Multiplier

    = [$48,200 : 947,100] * [1 : 0.87] * 1.53

    = 5.0892% * 1.1494 * 1.53

    = 8.95%
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