Answer:Net income=$164
Explanation:
Equity multiplier = 1 + Debt-equity ratio
Equity multiplier = 1 + 0.75
Equity multiplier = 1.75
And the total asset turnover is:
Total asset turnover = Sales / Total assets
Total asset turnover = $5,783 / $2,604
Total asset turnover = 2.22 times
ROE = (Profit margin)(Total asset turnover)(Equity multiplier)
0.11 = (Profit margin)(2.22)(1.75)
Profit margin = 0.14/3.885 =0.0283
Rearranging we can find the net income as
Profit margin = Net income / Sales
Net income = profit margin x Sales
Net income =0.0283 x $5,783,= $163.6589 = $164
