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Determining the firm profit margin

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As you can calculate, in Year 2 the firm's profit margin is 2.68%, ROA is 2.2808511%, and ROE is 8.4780316%. Assume that the firm could have increased its equity multiplier to 4.50 by issuing debt and using the proceeds to repurchase equity (debt increases, equity decreases, and the equity multiplier increases) while holding total assets and total asset turnover constant. What would the firm's profit margin have to have been in order for it to have achieved an ROE of 12.00 percent?

Reference no: EM132613253

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