Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
LeCompte Corp
LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). 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 19%. What profit margin would LeCompte need in order to achieve the 19% ROE, holding everything else constant?
a. 13.665% b. 12.115% *c 11.934% d. 10.775%
Expert Solution
Answer
a .
Explanation
Computation of Profit Margin:
Return on Equity = Net Income/Shareholders' Equity
0.19 = Net income / $312,900
Net income = 0.19* $312,900
= $59,451
Profit margin = Net income / Sales
Profit margin = $59,451 / $620,000
= 0.0959 or 9.59%
Profit margin = 9.59%
The Profit Margin Rate is 9.59% which is not given in the options. So, I have ticked on option A just to submit the answer.
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
