Given a Profit Margin = 10%, ROE = 20%, D/E

question 172

Multiple Choice

Given a profit margin = 10%, ROE = 20%, D/E = 1.5, and assets = $200, calculate sales.

• A) $10
• B) $160
• C) $250
• D) $640
• E) $1,000

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Definitions:

Net New Equity

Refers to the amount of money raised by a company through the issuance of new shares, subtracting any repurchases of existing shares.

Earnings Before Interest And Taxes

This represents the company’s earnings before the deduction of interest and tax expenses.

Net New Borrowing

The difference between the total amount of new borrowing and the total amount of debt repaid over a specific period.

Marginal Tax Rates

The rate at which an additional dollar of taxable income would be taxed.