Answer :
Final answer:
The equity multiplier is calculated by dividing the total debt ratio by one minus the total debt ratio. In this case, the equity multiplier is 1.325.
Explanation:
The equity multiplier is the total assets divided by the total equity. It is a measure of the extent to which a company uses debt to finance its assets. To calculate the equity multiplier, you can use the formula:
Equity Multiplier = Total Debt Ratio / (1 - Total Debt Ratio)
In this case, the total debt ratio is given as 0.57, so we can substitute this value into the formula:
Equity Multiplier = 0.57 / (1 - 0.57)
Simplifying the expression, we get:
Equity Multiplier = 0.57 / 0.43 = 1.325
