Barnes and Noble has a debt-equity ratio of 40 percent, sales of $800,000, a net profit margin of 7.5 percent, and debt of $240,000. Calculate the firms ROE. If the firm increases its debt-equity ratio will the ROE increase or decrease? (Hint: First calculate Equity and then Net Income. Finally, think about the DuPont Identity)

Group of answer choices

38.99 percent, increase

10.00 percent, decrease

38.99 percent, decrease

10.00 percent, increase

5.67 percent, increase