Assume jPhone, Inc., has an equity multiplier of 1.36, total asset turnover of 1.65, and a profit margin of 8 percent.

Assume jPhone, Inc., has an equity multiplier of 1.36, total asset turnover of 1.65, and a profit margin of 8 percent.

 

Required:

What is its ROE? (Do not include the percent sign (%). Round your answer to 2 decimal places (e.g., 32.16).)

 

ROE

%

 

Explanation:

With the information given, we must use the Du Pont identity to calculate return on equity. Doing so, we find:

 

ROE	=	(Profit margin)(Total asset turnover)(Equity multiplier)
ROE	=	(0.08)(1.65)(1.36)
ROE	=	0.1795 or 17.95%