Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $550,000, and its net income was $25,000. Stockholders recently voted for a new management team that has promised to lower costs and make a return on equity up to 15%. What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant? Do not round your intermediate calculations.

To calculate the required profit margin that Chang Corp. would need to achieve a 15% return on equity (ROE), we need to use the following formula for ROE:

ROE = Net Income + Total Equity 

We are given that Chang Corp. uses only common equity capital and has no debt, which means Total Equity is equal to the total assets of the company. We are also given the following information:

Total Equity (Total Assets) = $375,000 - Desired ROE = 15%

We want to find out the net income required to achieve this desired ROE:

 0.15 = Net Income Required, 375,000

To find the Net Income Required, solve for it:

Net Income Required = 0.15 * 375,000 

Net Income Required = 56,250 

The profit margin is calculated by dividing net income by sales and then multiplying by 100 to get a percentage:

Profit Margin = Net Income + Sales

We now want to find out what profit margin would yield the net income required to get an ROE of 15%. We have the Net Income Required ($56,250) and the Sales ($550,000), so we plug those into the profit margin formula:

Profit Margin = 56,250 / 550,000 

Profit Margin = 0.1022727 

Profit Margin = 10.23

Therefore, to achieve the 15% return on equity with the given sales and without changing the asset levels, Chang Corp. would need to achieve a profit margin of approximately 10.23%.