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Rowe and Company has an equity multiplier equal to 2 . 0 , a total assets turnover of 0 . 2 5 , and a

Rowe and Company has an equity multiplier equal to 2.0, a total assets turnover of 0.25, and a profit margin of 10%. Rowe has no preferred stock. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 14% and (2) by increasing debt utilization. Total assets turnover will not change. The firm's total assets equal $10 million, its total current liabilities are $400,000, and the firm has no short-term debt or preferred stock. What is the firm's total debt to total capital ratio if the ROE is doubled under these assumptions?
a.0.557
b.0.600
c.0.635
d.0.706
e.0.750

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