Precious metal mining has $7 million in sales, its roe is 11%, and its total assets turnover is 4x. common equity on the firm’s balance sheet is 75% of its total assets. what is its net income? write out your answer completely. for example, 5 million should be entered as 5,000,000. do not round intermediate calculations. round your answer to the nearest cent.

$144,329.9

Explanation:

From the ROE formula we can find net income:

What we will do is clear each variable until we get only one unknown: net income. In the problem statement we find two values: Sales (7,000,000) and ROE (11% or 0.11). Then, we would need to find "Total Assets" and "Common Equity".

1. Find Total Assets.

In this case, total assets turnover is 4. Therefore:

2. Find Common Equity.

3. Replace values.

Once all these values have been found, we replace in the ROE formula (remember that the only unknown is net income):

It is now easier to clear net income: