Question
The most recent annual report lists company Sales revenue at $101,025 . Cost analysis suggests that annual Total fixed costs equal $38,475 and Total variable
The most recent annual report lists company Sales revenue at $101,025 . Cost analysis suggests that annual Total fixed costs equal $38,475 and Total variable costs equal $45,675 . The annual Interest expense is $2,125 and there is no preferred stock. The company pays 35% of taxable income as taxes. The annual report also shows ROE, that is return on equity (=Net incomet / Stockholders' equityt), equals 15.7%. The company wants to increase its ROE to a target of 21.0%. They plan to hold constant Stockholders' equity, Total assets, Total fixed costs, Interest, and the ratio of Sales revenue to Total variable costs. Find the target Sales revenue and net profit margin (=Net income / Sales revenue) that provides the target ROE.
a. | Target Sales revenue equals $83,261 and the net profit margin is 11.6% | |
b. | Target Sales revenue equals $95,751 and the net profit margin is 11.6% | |
c. | Target Sales revenue equals $110,113 and the net profit margin is 11.6% | |
d. | Target Sales revenue equals $110,113 and the net profit margin is 10.1% | |
e. | Target Sales revenue equals $95,751 and the net profit margin is 10.1% |
please show working out!!
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