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FIN Company: Balance Sheet as of December 31 ($ million) $40 Cash Account receivables Inventories Total current assets $40 $20 $100 $40 Account Payables ? Notes payable $160 Other current liabilities $310 Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity $450 Total liabilities and equity $140 $114 ? Net fixed assets Total assets FIN Company: Income Statement for Year Ended December 31 ($ million) $800.0 Net sales Cost of goods sold (80% of net sales) Gross profit (EBITDA) Amortization Depreciation Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Taxes (20%) Net Income ($73.0) ($12.0) ($4.5) Industry Average Ratios Quick ratio Fixed assets turnover ratio Debt ratio Total assets turnover ratio Times interest earned (TIE) ratio Profit margin Inventory turnover ratio Return on total assets (ROA) Days sales outstanding (DSO) Return on equity (ROE) 1.0 6.0 30.0% 3.0 7.0 3.0% 8.5 9.0 24 days 12.9% A firm has a profit margin of 15 percent on sales of $20,000,000. If the firm has a debt of $7,500,000, total assets of $22,500,000, and an after-tax interest cost on a total debt of 5 percent, what is the firm's return on equity (ROE)? 0 17% O 13% O 18% 0 20% O 12%

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