What effect would expect new leverage policy


This year Digby achieved an ROE of 25.1%. Suppose the Board of Directors of Digby mandates that management take measures to increase financial Leverage (=Assets/Equity) next year. Assuming Sales, Profits, and Assets remain the same next year, what effect would you expect this new Leverage policy will have on Digby ROE?

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Operation Management: What effect would expect new leverage policy
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