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29 January, 07:54

Best-Ever Chicken has a debt-equity ratio of. 94. Return on assets is 8.5 percent, and total equity is $520,000. What is the net income? a. $74,909b. $88,880c. $44,200d. $85,748e. $41,548

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  1. 29 January, 07:57
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    d. $85,748

    Explanation:

    For computing the net income we have to do the following calculations

    Debt equity ratio = (Total debt : Shareholders' Equity)

    0.94 = (Total debt : $520,000)

    So, the total debt = $520,000 * 0.94 = $488,800

    And, the total assets would be equal to

    = Total debt + total equity

    = $488,800 + $520,000

    = $1,008,800

    Return on assets = (Net income) : (total assets)

    8.5% = Net income : $1,008,800

    Hence, net income = $85,748
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