Profit Margin
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Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). 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 up to 15.0%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?
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Solution Summary
The solution explains how to determine the profit margin needed to get a desired ROE
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ROE = Net Income/Total Equity
Since the firm only uses equity for financing, the ...
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