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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: 8 years ago.
Category: Finance
Expert:  Annie Kavitha replied 8 years ago.



Total assets = 500,000 = total equity


ROE = Net income/ Total equity = 15%


Net income = 500,000 x 15%


= 75,000




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