LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its...
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LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 20%. What profit margin would LeCompte need in order to achieve the 20% ROE, holding everything else constant? |
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Homework Answers
Correct answer is option C. 10.09%
Net income to be achieve by target ROE = Target ROE × Equity
$312,900 x 20% = $62,580
So Profit margin needed to achieve target ROE = Net income /
Sales
$62,580/ 620,000 =10.09%
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LeCompte Corp. has $312,900 of assets, and it uses only common
equity capital (zero debt). Its...
LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its...
LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $720,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant? Select the correct answer. LeCompte Corp. has $312,900 of...
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