LeCompte Corp.has $312,900 of assets, and it uses only common equity capital Its sales for the last year were $620,000, and its net income after taxes was $24,655.Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%.What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant?
A)7.57%
B)7.95%
C)8.35%
D)8.76%
E)9.20%

Question

Quizplus · Accepted Answer

ROE = Net income / Stockholders' equity15% = 24,655 / Stockholders' equityStockholders' equity = 24,655 / 0.15 = $164,367Profit margin = Net income / SalesProfit margin = 24,655 / 620,000 = 0.0795 = 7.95%