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    Profit margins: What is return on equity given various ratios and amounts?

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    To maintain a profit margin of 4% and a sales-to-assets ratio of 3, what is the ROA, if the debt-equity ratio is 1.0, interest payments and taxes are each $10,000, and EBIT is $40,000. What is the return on equity?

    Using Excel use math and finance functions so calulations can be seen in background.

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    Solution Preview

    See attached Excel file

    profit margin = income / Sales = 4%
    Sales / Asset = 3
    ROA ...

    Solution Summary

    In Excel, the solution is clearly detailed for ease of understanding. The returns on equity given various ratios and amounts for profit margins are examined.