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Annie Kavitha
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An investor is considering starting a new business.

Resolved Question:

An investor is considering starting a new business. The company would requite $500,000 of assets, and it would be financed entirely with common stock. The investor will go forward only if she thinks the firm can provide a 15.0% return on the invested capital, which means that the firm must have an ROE of 15.0%. How much income must be expected to warrant starting a new business?
Submitted: 7 years ago.
Category: Finance
Expert:  Annie Kavitha replied 7 years ago.

HelloCustomer

 

Total assets = 500,000 = total equity

 

ROE = Net income/ Total equity = 15%

 

Net income = 500,000 x 15%

 

= 75,000

 

 

 

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