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I can't seem to reply to the original thread.

Don't quite get the solution posted for 303.3

Let A = Assets and E = Equity with D = A - E.

ROE = ROA/Equity = [(5%*A) - (A - E)*4%]/E. Since ROE must be at least 15%, the minimum leverage is achieved when ROE = 15% such that:

[(5%*A) - (A - E)*4%]/E = 15%, and

[(5%*A) - (A - E)*4%] = 15%*E, and

5%*A - 4%*A + 4%*E = 15%*E, and

1%*A = 11%*E, such that:

A/E = 11%/1% = 11.0

Wouldn't LR = ROA/ROE rather than ROE = ROA/Equity?

where

Don't quite get the solution posted for 303.3

Let A = Assets and E = Equity with D = A - E.

ROE = ROA/Equity = [(5%*A) - (A - E)*4%]/E. Since ROE must be at least 15%, the minimum leverage is achieved when ROE = 15% such that:

[(5%*A) - (A - E)*4%]/E = 15%, and

[(5%*A) - (A - E)*4%] = 15%*E, and

5%*A - 4%*A + 4%*E = 15%*E, and

1%*A = 11%*E, such that:

A/E = 11%/1% = 11.0

Wouldn't LR = ROA/ROE rather than ROE = ROA/Equity?

where

- ROA = Inc / A and
- ROE = Inc / E
- Combining both E * ROE = A * ROA --> A/E = ROE/ROA - LR

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