The Board of Directors Is Dissatisfied with Last Year's ROE

Multiple Choice

The board of directors is dissatisfied with last year's ROE of 15 percent.If the profit margin and asset turnover remain unchanged at 8 percent and 1.25 respectively, by how much must the total debt ratio increase to achieve 20 percent ROE?

A) Total debt ratio must increase by .5
B) Total debt ratio must increase by 5
C) Total debt ratio must increase by 5 percent
D) Total debt ratio must increase by 16.67 percent Last Year:
ROE = .15 = Profit margin x Asset turnover x leverage rate
= ) 08 x 1.25 x 1.5
This Year:
ROE = .20 = .08 x 1.25 x?