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Gibbon Corp. has a debt ratio of 60%, total assets turnover of 0.30, and a net profit margin of 10%. The Board of Directors is
Gibbon Corp. has a debt ratio of 60%, total assets turnover of 0.30, and a net profit margin of 10%. The Board of Directors is unhappy with the current return on equity (ROE), and it thinks that it could be doubled. This could be accomplished (1) by increasing the profit margin to 15%, and (2) by increasing debt utilization. Total asset turnover will not change. What new debt ratio, along with the 15% profit margin, is required to double the ROE?
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