Consider a ﬁrm which forecasts that costs, assets, and current liabilities will all change
proportionately with sales and the dividend payout ratio will remain ﬁxed. How will the ﬁrm's ROE
change as a result of a forecast 30% increase in sales? How will the individual components of ROE
(the Du Pont identity) change? Why?

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The Answer of Consider a ﬁrm which forecasts that costs, assets, and current liabilities will all change
proportionately with sales and the dividend payout ratio will remain ﬁxed. How will the ﬁrm's ROE
change as a result of a forecast 30% increase in sales? How will the individual components of ROE
(the Du Pont identity) change? Why?

Consider a ﬁRm Which Forecasts That Costs, Assets, and Current