Calculate total asset value given the following information: ROA = 5%; Total equity = $600,000 and ROE = 8%.
A) $960,000
B) $1,100,000
C) $1,200,000
D) $1,300,000
E) $1,400,000

Question

Quizplus · Accepted Answer

Total asset value can be calculated using the formula for Return on Assets (ROA) = Net Income / Total Assets. Similarly, Return on Equity (ROE) = Net Income / Total Equity. Given ROE = 8% and Total Equity = $600,000, we can find Net Income = 0.08 * $600,000 = $48,000. Using the ROA = 5%, we rearrange the formula to find Total Assets = Net Income / ROA = $48,000 / 0.05 = $960,000.

Calculate Total Asset Value Given the Following Information: ROA =