For a firm that has both debt and equity,

For a firm that has both debt and equity,

A) ROE > ROA.
B) ROE < ROA.
C) ROE = ROA
D) None of the above.


Answer: A

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• PV of multiple cash flows: Jack Stuart has loaned money to his brother at an interest rate of 5.75 percent. He expects to receive $625, $650, $700, and $800 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.)
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• FV of multiple cash flows: Stiglitz, Inc., is expecting the following cash flows starting at the end of the year—$113,245, $132,709, $141,554, and $180,760. If their opportunity cost is 9.6 percent, find the future value of these cash flows. (Round to the nearest dollar.)
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• Interest rate: Pedro Martinez wants to invest $25,000 in a spa that his sister is starting. He will triple his investment in six years. What is the rate of return that Pedro is being promised? (Rounded to the nearest percent.)
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