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%. If the profit margin and asset turnover ratio remain unchanged at 8% and 1.25, respectively, by how much must the leverage ratio (i.e., assets/equity) increase to achieve 20% ROE?

A) .50%
B) 5%
C) 16.67%
D) 33.33%