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Your company has a debt ratio of .5, a total assets turnover ratio of .25, and a profit margin of 8 percent. The Board of Directors is unhappy with the current return on equity (ROE), and they think it could be doubled. This could be accomplished (1) by increasing the profit margin to 10 percent, and (2) by increasing debt utilization. Total asset turnover will not change. What new debt ratio, along with the new 10 percent profit margin, would be required to double the ROE?

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Financial Management, Finance

Category:- Financial Management
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