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You are considering adding a new product to your firm's existing product line. It should cause a 15 percent increase in your total margin (i.e.,
You are considering adding a new product to your firm's existing product line. It should cause a |
15 percent increase in your total margin (i.e., new TM = old TM x 1.15), but it will also require |
a 50 percent increase in total assets (i.e., new TA = old TA x 1.5). You expect to finance this asset |
growth entirely by debt. If the following ratios were computed before the change, what will be |
the new return on equity if the new product is added and sales remain constant? |
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