Question

Вопрос 3 Moogle, Inc. is in the same business as Google, Inc., but has recently retired all its debt to become an all-equity firm. Its return on equity has dropped from 12.00% to 10.75% as a result of this. Google, Inc. continues to have debt in its capital structure, and its debt-to-equity ratio is 30.00%. What is the percentage return on assets of Google, Inc.? (Allow two decimals in the percentage but do not enter the % sign.)

Answer 1

The percentage return on assets (ROA) of Go--ogle, Inc. is 25.00%.

Step-by-step explanation:

To find the return on assets (ROA) for G--oogle, Inc., we need to calculate the percentage return on assets. ROA is calculated by dividing the net income by the total assets. We can find the net income by multiplying the return on equity (ROE) by the equity. Here's how:

ROE = 10.75%

Equity = 100% (since Moogle, Inc. is an all-equity firm)

Net Income = ROE * Equity = 10.75% * 100% = 10.75%

To calculate the total assets, we can use the debt-to-equity ratio of G--oogle, Inc. which is 30.00%. The formula to calculate total assets is:

Total Assets = Debt / (1 - Debt-to-Equity Ratio)

Total Assets = 30.00% / (1 - 30.00%) = 30.00% / 0.70 = 42.86%

Finally, we can calculate the ROA:

ROA = Net Income / Total Assets = 10.75% / 42.86% = 25.00%