Given that a
firm has return on assets (roa) of 15 percent, and debt-equity ratio of
60 percent.
Then, equity multiplier = 1 + Debt-equity ratio = 1 + 60/100 = 1 + 0.6 = 1.6
Return on equity (roe) is given by return on asset multiplied by the equity multiplier.
Therefore, the firm's return on equity is 1.6 x 0.15 = 0.24 = 24%.
