How Much Will Gamma Inc

Multiple Choice

How much will Gamma Inc.'s equity holders earn given the following information: total asset turnover is 0.85, profit margin is 0.15, and debt-equity ratio is 0.25?

A) 9.56 percent
B) 15.94 percent
C) 16.96 percent
D) 38.25 percent Given D/E ratio then leverage ratio:
1 + D/E = 1 + 0.25 = 1.25
ROE = PM x TAT x LR = 0.12 x 0.65 x 1.25