In calculating the ROE, I am having difficulty going getting the A/E when they give you D/E.
In one problem, they said D/E =2 and so they use (D+E)/E= 3 in calculating ROE. I am confused....
When I calculate it, I come up with A/E = 1.5. If D/E = 2, then D=1.5E and assuming D+E=A, A=1.5E. Can someone please explain to me where I am going wrong here or how best to think about it? Thanks.
I am referring to Schweser Self Test Equity Investments Problem #11 on page 255 if anyone is wondering. Thanks. |