New Doors Corp. has $375,000 of total assets, and it uses $187,500 of total shareholder's equity capital.  Its sales for the last year were $520,000, and its net income was $25,000.  Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity (ROE) up to 15.0%.  What profit margin (PM) would the firm need in order to achieve the 15% ROE, holding everything else constant?   1. 10.71%   2. 5.41%   3. 9.41%   4. 12.66%   5. 8.11%

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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New Doors Corp. has $375,000 of total assets, and it uses $187,500 of total shareholder's equity capital.  Its sales for the last year were $520,000, and its net income was $25,000.  Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity (ROE) up to 15.0%.  What profit margin (PM) would the firm need in order to achieve the 15% ROE, holding everything else constant?

  1.

10.71%

  2.

5.41%

  3.

9.41%

  4.

12.66%

  5.

8.11%

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