Pacific Packaging's ROE last year was only 5%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $360,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $672,000 on sales of $8,000,000, and it expects to have a total assets turnover ratio of 2.3. Under these conditions, the tax rate will be 25%. If the changes are made, what will be the company's return on equity? Do not round intermediate calculations. Round your answer to two decimal places.
Pacific Packaging's ROE last year was only 5%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $360,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $672,000 on sales of $8,000,000, and it expects to have a total assets turnover ratio of 2.3. Under these conditions, the tax rate will be 25%. If the changes are made, what will be the company's return on equity? Do not round intermediate calculations. Round your answer to two decimal places.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Pacific Packaging's ROE last year was only 5%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 40%, which will result in annual interest charges of $360,000. The firm has no plans to use ____% |
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