Chang Corp

question 26

Multiple Choice

Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt) . Its sales for the last year were $595,000, and its net income was $25,000. Stockholders recently voted in a new management team that has promised to lower costs and raise the return on equity to 15.0%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?

• A) 9.45%
• B) 9.93%
• C) 10.42%
• D) 10.94%

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Definitions:

Cost

The amount of money or resources expended to gain an object or service.

Ethical

Pertaining to morals, principles of right and wrong, and the conduct that is considered correct.

Short-term Investment

Investments that are made with the intention of converting them into cash within a short period, typically within a year.

Takeover Bid

An offer made by an entity to acquire a controlling interest in another company.