Bamp; C Co. has net income of $48,200, sales of $947,100, a capital intensity ratio of. 87, and an equity multiplier of 1.53. What is the return on equity?6.77 percent5.93 percent8.95 percent12.21 percent14.09 percent

Option (C) is correct.

Explanation:

Return on Equity (ROE) = ?

Using DuPont Model, the Return on Equity (ROE) is calculated by using the following formula:

Return on Equity (ROE):

= Net Profit Margin * Total Asset Turnover * Equity Multiplier

= [Net Income : Sales] * [1 : Capital Intensity Ratio] * Equity Multiplier

= [$48,200 : 947,100] * [1 : 0.87] * 1.53

= 5.0892% * 1.1494 * 1.53

= 8.95%