Illustrate what effect would you expect this new leverage

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Reference no: EM1382710

Q. This year Andrews achieved an ROE of 7.2%. Suppose the Board of Directors of Andrews mandates which management take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, and Assets remain the same next year, illustrate what effect would you expect this new Leverage policy will have on Andrews ROE?
Andrews ROE will remain the same.
Andrews ROE will decrease.
Andrews ROE will increase.

Reference no: EM1382710

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