Redrack Ltd operates in the retailer sector. The company has experienced

tough trading conditions in the last year. The company$$s net profit margin was

$3\%$ the company achieved an asset turnover of $1\mathrm{.}7.$ The company$$s debt $-$

equity ratio is $40\%.(15$ marks$)$

i$)$ What is the company$$s Return on Asset?

ii$)$ What is the company$$s Return on Equity?

iii$)$ Assume the company increases its profit margin to $10\%$and its asset

turnover is expected to be $2\mathrm{.}5$ in the coming year. The company debt

$3$

equity ratio will be $66\mathrm{.}67\%.$ what will these changes have on the

company$$s ROE?