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Return on equity in a firm

FIRM A AND FIRM B HAVE DEBT-TOTAL ASSET RATIOS OF 60 PERCENT AND 40 PERCENT AND RETURNS ON TOTAL ASSETS OF 20 PERCENT AND 30 PERCENT, RESPECTIVELY. WHICH FIRM HAS GREATER RETURN ON EQUITY?

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Solution Preview

ROE = ROA X Assets/Equity
We are given the Debt/Assets ratio
Now Equity/Assets = ...

Solution Summary

The solution explains how to calculate the return on equity

$2.19