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This year Baldwin achieved an ROE of 0.4%. Suppose the Board of Directors of Baldwin mandates that management take measures to increase financial Leverage (=Assets/Equity)

This year Baldwin achieved an ROE of 0.4%. Suppose the Board of Directors of Baldwin mandates that management take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, and Assets remain the same next year, what effect would you expect this new Leverage policy will have on Baldwin ROE?

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