merican capital has $375000 off assets and uses only common equity capital Sales for the last year were $420000 and stockholders recently voted in a new management team that has promised to lower cost and increase the company’s return on equity Holding everything else constant what profit margin would the firm need in order to achieve an ROE of 12
merican capital has $375000 off assets and uses only common equity capital Sales for the last year were $420000 and stockholders recently voted in a new management team that has promised to lower cost and increase the company’s return on equity Holding everything else constant what profit margin would the firm need in order to achieve an ROE of 12
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
American capital has $375000 off assets and uses only common equity capital
Sales for the last year were $420000 and stockholders recently voted in a new management team that has promised to lower cost and increase the company’s return on equity
Holding everything else constant what profit margin would the firm need in order to achieve an ROE of 12.1%
Expert Solution
Step 1: Define=profit margin
Profit margin is the how much profit earned by per unit sales of the product and can be obtained by dividing net income by sales.
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