Hampton Housewares Company (HHC) has $1,250,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $1,000,000, and its net income was $75,000. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 12%. What profit margin would HHC need in order to achieve the 12% ROE? Assume that the new actions will have no effect on total assets and sales, and it will not change the company's determination to use 100% equity to finance its operations.
a. 9.00%
b. 10.50%
c. 12.25%
d. 13.66%
e. 15.00%