Chang Corp. has $575,000 of assets, and it uses only common equity capital (zero debt). Its sales last year were $795,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 7.0%. What profit margin would the firm need in order to achieve the 7% ROE, holding everything else constant? Hint: Use the DuPont Equation, setting BVE = $575,000.
4.45%
5.06%
6.42%
6.94%
7.49%