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19 April, 18:21

Last year, DJ's Soda Fountains, Inc. reported an ROE = 27 percent. The firm's debt ratio was 50 percent, sales were $9 million, and the capital intensity ratio was 1.5 times. What is the net income for DJ's last year? Multiple Choice a. $1.22m b. $1.82m c. $2.43m d. $2.84m

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  1. 19 April, 18:31
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    b. $1.82m

    Explanation:

    Capital Intensity ratio = Total aasets / sales

    1.5 = Total Assets / 9m

    Total Assets = 9m x 1.5 = 13.5

    ROE = Total Income / Shareholders equity

    27% = Total Income / (13.5 x 50%)

    27% = Total Income / 6.75

    Total Income = 27% x 6.75

    Total Income = 1.8225

    Total Income = 1.82 (Rounded)

    The correct option is b. $1.82m.
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