In the year 2010, the average firm in the S&P 500 Index had a total market value of fives times stockholders’ equity (book value). Assume a firm had total assets of $10 million, total debt of $6 million, and net income of $600,000.
a. What is the percent return on equity?
b. What is the percent return on total market value? Does this appear to be an adequate return on the actual market value of the firm?