The Board of Directors for Broadstar Entertainment Inc. has been pressuring the CEO to increase ROE for shareholders. During an in- terview on CNBC, he announces his plan for improving the financial performance of the firm. His plan is to raise prices on all of the com- pany's products by 10 percent. He justifies this plan by observing that ROE can be decomposed into the product of profit margin, asset turnover, and financial leverage. Thus, by raising prices, he will in- crease profit margin and therefore ROE. Are you convinced that his plan will work to improve ROE? Why or why not?

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