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Fin 300 Chp 3.docx

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Department
Finance
Course
FIN 300
Professor
Tsogbadral Galaabaatar
Semester
Fall

Description
Allarco Inc. has a debt/equity ratio of 2.00. The return on assets is 10 percent, and total equity is $480,000 Your solution to the question was: Allarco Inc. has a debt/equity ratio of 2.00. The return on assets is 10 percent, and total equity is $480,000 a) What is the equity multiplier? Equity Multiplier =2.50 Marking Equity multiplier Your answer was: 2.50 The correct answer was: 3.00 Recall the formula for the Debt/Equity Ratio: Debt/Equity Ratio =otal Debt Total Equity To find the equity multiplier we can just add 1 to the Debt/Equity Ratio, as shown here: Equity Multiplier =al Assets Total Equity = Total Equity + Total Debt Total Equity = 1 + Debt/Equity Ratio = 3.00 You will lose 2 marks for this part. b) What is the return on equity? (Enter your answer in percentage form) Return on equity =25% Marking Return on equity Your answer was: 25.00% The correct answer was: 30.00% You have correctly deduced this from your earlier answers; however, at least one of your earlier answers was incorrect, causing your answer for this part to be incorrect. You will not lose any further marks for this. c) What is the net income? Net income = $120,000 Marking Net income Your answer was: $120,000.00 The correct answer was: $144,000.00 You have correctly deduced this from your earlier answers; however, at least one of your earlier answers was incorrect, causing your answer for this part to be incorrect. You will not lose any further marks for this. To
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