Problem:
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%.
Required:
Question: What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?
Note: Provide support for your rationale.