Can you please give me true answer this financial accounting question? Last year, a company named TechSolutions Inc. had $500,000 in assets,$35,000 of net income, and a debt-to-total-assets ratio of 50%. Nowsuppose the newly hired CFO convinces the president to increase the debtratio to 65%. Sales and total assets will not be affected, but interestexpenses would increase. However, the CFO believes that better costcontrols would be sufficient to offset the higher interest expense andtherefore keep net income unchanged.Assuming the president of the firm allows the CFO to increase the debtratio to 65%, what will be the new ROE?

Step 1: Define Return on Equity (ROE)Return on Equity (ROE) measures the profitability of a company…

Answered: Last year, a company named…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

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what will be the new ROE'?
Rowe and Company has a debt ratio of 0.50, a total assets turnover of 0.25, and a profit margin of 10 percent. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 14 percent and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14 percent profit margin, is required to double the return on equity?
Roland & Company has a new management team that has developed an operating plan to improveupon last year’s ROE. The new plan would place the debt ratio at 55 percent, which will result ininterest charges of $7,000 per year. EBIT is projected to be $25,000 on sales of $270,000, it expects tohave a total assets turnover ratio of 3.0, and the average tax rate will be 40 percent. What does Roland& Company expect its return on equity to be following the changes?
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Barb is asked to analyze a new software firm. This year the firm has total revenues of $110 million and expenses (excluding interest payments) of $50 million. The firm has $90 million of capital, of which $30 million is in debt financed at an 8% annual interest rate and the rest is equity. Barb estimates that the cost of equity capital here is 15%. Barb determines this firm has accounting profi of [Select] [Select] economic profit of [Select] a good use of capital. く and
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