Question

Y3K, Inc., has sales of $7,445, total assets of $3,510, and a debt-equity ratio of .31. Assume the return on equity is 14 percent.

What is its equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places

Answer 1

The equity multiplier for Y3K, Inc. is 3.23.

Step-by-step explanation:

The equity multiplier can be calculated using the formula:

Equity Multiplier = Total Assets / Total Equity

In this case, we are given the total assets as $3,510 and the debt-equity ratio as 0.31. To find the total equity, we can multiply the debt-equity ratio by the total assets:

Total Equity = Debt-Equity Ratio x Total Assets = 0.31 x $3,510 = $1,086.10

Now we can calculate the equity multiplier:

Equity Multiplier = Total Assets / Total Equity = $3,510 / $1,086.10 = 3.23

Therefore, the equity multiplier for Y3K, Inc. is 3.23.