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B Corporation has an operating profit margin (EBIT/revenue) of 11%; an asset turnover ratio of 1.2; a financial leverage multiplier of 1.5 times; an average tax rate of 35%; and an interest burden of 0.8. B Corporation’s return on equity is closest to:

Answer :

Answer:

The return on equity for B corporation is 19.8%

Explanation:

According to the Dupont formula the return on equity is a product of asset turnover ratio , financial leverage and profit margin.

So in order to find the return on equity we have to multiply the profit margin, asset turnover ratio and financial leverage multiplier.

0.11*1.2*1.5= 0.198=19.8%

The return on equity for B corporation is 19.8%

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