The board is dissatisfied with the 15% ROE last year. If operating margin and asset turnover remain

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The board is dissatisfied with the 15% ROE last year. If operating margin and asset turnover remain constant at 8% and 1.25%, respectively, how much would the leverage ratio (ie assets/equity) need to increase to reach 20% ROE?

The answer is 33.33%.

Could you be kind and show in detail which formula was applied and how it was calculated?

Related Book For answer-question

Principles of Finance

ISBN: 978-1285429649

6th edition

Authors: Scott Besley, Eugene F. Brigham

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Posted Date: Apr 27, 2023 07:25 AM

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The board is dissatisfied with the 15% ROE last year. If operating margin and asset turnover remain

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Expert Answer:

Sure We can use the DuPont formula to solve this problem The DuPont formula expresses the return on ... View the full answer

Principles of Finance

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