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You are considering adding a new product to your firm's existing product line. It should cause a 1 0 percent increase in your profit margin
You are considering adding a new product to your firm's existing product line. It should cause a percent increase in your profit margin ie new PM old PM x but it will also require a percent increase in total assets ie new TA old TA x You expect to finance this asset growth entirely by debt. If the following ratios were computed before the change, approximately what will be the new ROE if the new product is added and sales remain constant? Ratios before new product were Profit margin Total assets turnover and Equity multiplier
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