Answer:
a.
42.7%
b.
48.4%
Step-by-step explanation:
a.
Return on equity is the ratio of net income to its total equity.
Use following formula to calculate the Return on equity
Return on equity = Net Income / Average equity
Return on equity = $2,558.4 million / ( ( $5,716 million + $6,262 million ) / 2 )
Return on equity = 0.427
Return on equity = 42.7%
b.
Repurchase of common stock will reduce the equity value and as a result it reduces the average equity value used in the denominator of Return n equity formula. Ultimately the ROE will be improved.
Return on equity = $2,558.4 million / ( ( $5,716 million + ($6,262 million - $1,400 million ) / 2 )
Return on equity = 0.484
Return on equity = 48.4%