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Acme Dynamite is maintaining a solid debt ratio of .37 with total assets of $1,250 million....

Acme Dynamite is maintaining a solid debt ratio of .37 with total assets of $1,250 million. If its D/E ratio is .65 and it has NOI of $150 million, what is its return on equity?

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Answer #1

Total assets = $ 1250 Million

Net operating Income (NOI) = $ 150 million

Debt to assets ratio = 0.37

Total Debt / Total assets = 0.37

Total Debt = 0.37 * $ 1250 milion

Total Debt = $ 462.5 million

Debt equity ratio = 0.65

Debt / Equity = 0.65

Equity = Debt / 0.65

Equity = $ 462.5 million / 0.65

Equity = $ 711.5385 million

Return on Equity = Net income / Equity

Return on Equity = $ 150 million / $ 711.5385 million

Return onn Equity = 0.2108

* no further informarion available, so Net operating income is considered as net income

Please comment if any further assistance is required.

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