Answer:
Explanation:
Equity multiplier is one of the financial leverage ratios, which measures the amount of a company's asset that are financed by the shareholder by comparing total assets with total shareholder's equity
[tex]\text {Equity multiplier}=\frac{\text {Total Assets}}{\text {Total Equity}}[/tex]
[tex]\text {Return on owner's equity}=\frac{\text {Net income}}{\text {Total equity}}[/tex]
Determine the amount of equity multiplier
Equity multiplier = 1 + Debt to equity ratio
= 1 + 0.65
= 1.65
Hence, the amount of equity multiplier is 1.65
Determine the amount of return on equity
Return on equity = Return on assets * Equity multiplier
= 0.082 * 1.65
= 13.53%
Hence, the Return on equity is 13.53%
Determine the amount of Net income
Net income = Return on equity * Total equity
= 13.53% * $515,000
= $69,679.50
Hence, the amount of net income is $69,679.50
