Return on Equity (ROE) is the ultimate metric for shareholders, but an increase isn't always good news. In this challenge, students use the three-factor DuPont model (ROE = ROS × AT × EM) to investigate a company whose ROE jumped from 15% to 18%. By applying the Chain Substitution method, students will uncover whether this growth was driven by operational excellence, or if management simply pumped up the results using risky financial leverage. 

Roadmap to Solution:

Step 1: Understand the sequence of the DuPont model for this analysis: Return on Sales (ROS) → Asset Turnover (AT) → Equity Multiplier (EM).

Step 2: We need to calculate the impact of the Equity Multiplier (EM), which is the third and final factor in the chain.

Step 3: Apply the cascade rule for the factors preceding EM. Since ROS and AT come first, they have already been substituted. Use their new, actual values (ROS₁ and AT₁).

Step 4: Calculate the change in the Equity Multiplier (EM₁ - EM₀).

Step 5 (Leverage Impact): Multiply them together: ROS₁ × AT₁ × (EM₁ - EM₀). Hint: Enter the final result as a full percentage point value (e.g., if the answer is 0.05, enter 5).