Questions: If Marin, Incorporated, has an equity multiplier of 1.64, total asset turnover of 1.90, and a profit margin of 4.4 percent, what is its ROE? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.

Solution Steps

To solve for the Return on Equity (ROE), we can use the DuPont Identity formula, which is given by:

\[ \text{ROE} = \text{Profit Margin} \times \text{Total Asset Turnover} \times \text{Equity Multiplier} \]

Given:

• Equity Multiplier = 1.64
• Total Asset Turnover = 1.90
• Profit Margin = 4.4% (or 0.044 in decimal form)

We will plug these values into the formula to calculate the ROE.

We are provided with the following values:

• Equity Multiplier: \( EM = 1.64 \)
• Total Asset Turnover: \( TAT = 1.90 \)
• Profit Margin: \( PM = 0.044 \)

To find the Return on Equity (ROE), we use the DuPont Identity formula:

\[ ROE = PM \times TAT \times EM \]

Substituting the given values:

\[ ROE = 0.044 \times 1.90 \times 1.64 \]

Calculating the above expression:

\[ ROE = 0.044 \times 1.90 \times 1.64 = 0.137104 \]

To express ROE as a percentage, we multiply by 100:

\[ ROE\% = 0.137104 \times 100 = 13.7104 \]

Rounding to two decimal places, we have:

\[ ROE\% \approx 13.71 \]

Final Answer