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

10.00 percent, increase

10.00 percent, decrease

38.99 percent, increase

38.99 percent, decrease

5.67 percent, increase