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12 September, 04:27

Gates Appliances has a return-on-assets (investment) ratio of 19 percent. a. If the debt-to-total-assets ratio is 20 percent, what is the return on equity

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  1. 12 September, 04:28
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    23.8%

    Explanation:

    Gates appliances has a return-on-assets (investment) of 19%

    The debt-to-total-assets ratio is 20%

    Therefore, the return on equity can be calculated as follows

    Return on equity = Return on assets (investment) / (1-debt/asset)

    = 19 / (1-20/100)

    = 19 / (1-0.2)

    = 19/0.8

    = 23.8%

    Hence the return on equity is 23.8%
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