Problem:
In 2012, NH Co. had a profit margin of 10%, total asset turnover of 0.5, and a debt ratio of 20%. ( The company finances its assets with debt and common equity; it does not use preferred stock.) In 2013, the company's CFO wants to double ROE. She expects the total assets turnover will remain at 0.5, while the profit margin and debt ratio will increase enough to double ROE. Assume that the profit margin is increased to 15%,
Required:
Question 1: What debt ratio will the company need in order to double its ROE?
Note: Explain all steps comprehensively.