The Board of Directors is dissatisfied with last year's ROE of 15%. If the profit margin and asset turnover remain unchanged at 8% and 1.25 respectively, by how much must the total debt ratio increase to achieve 20% ROE?     A. Total debt ratio must increase by 44%   B. Total debt ratio must increase by 4%   C. Total debt ratio must increase by 5%   D. Total debt ratio must increase by 50%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The Board of Directors is dissatisfied with last year's ROE of 15%. If the profit margin and asset turnover remain unchanged at 8% and 1.25 respectively, by how much must the total debt ratio increase to achieve 20% ROE?
 
 
A. Total debt ratio must increase by 44%
 
B. Total debt ratio must increase by 4%
 
C. Total debt ratio must increase by 5%
 
D. Total debt ratio must increase by 50%
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