For fiscal year 2017, Aeon Group had a net profit margin of 2.05%, asset turnover of 3.48,

Question:

For fiscal year 2017, Aeon Group had a net profit margin of 2.05%, asset turnover of 3.48, and a book equity multiplier of 3.15.

a. Use this data to compute Aeon’s ROE using the DuPont Identity.

b. If Aeon’s managers wanted to increase its ROE by one percentage point, how much higher would their asset turnover need to be?

c. If Aeon’s net profit margin fell by one percentage point, by how much would their asset turnover need to increase to maintain their ROE?

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