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Does plan make sense

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Question 1: The Board of Directors of Collins Entertainment, Inc. has been pressuring it's CEO to boost ROE. During a recent interview on NBC, he announces his plan to improve the firm's financial performance. He will raise prices on all of the companies products by 10%. He justifies the plan by observing that ROE can be decomposed into the product of profit margin, asset turnover and financial leverage (also called the DuPont Analysis). By raising prices he will increase the profit margin and thus ROE. Does this plan make sense to you? Why or why not?

Reference no: EM132902390

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