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1. Figures below are the financial ratios for two firms in the same industry: Firm A Firm B Asset Turnover 2.1 2 Profit Margin .25

1. Figures below are the financial ratios for two firms in the same industry: Firm A Firm B Asset Turnover 2.1 2 Profit Margin .25 .12 Equity Multiplier 1 3

a) Based on the above ratios, calculate the ROE for both firms. b) Calculate the unlever ROE for both firms (ROE if they have zero debt). Assume profit margin remains unchanged.

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