Chapter 16, Problem 16.12DMP

Delta Containers had a Return on Equity (ROE) of only 5% last year. Management is considering a new operating plan that includes: Total debt ratio: 60% EBIT: $1,500,000 Annual interest charges: $450,000 Sales: $15,000,000 Total asset turnover ratio: 2.5 Tax rate: 35% If the changes are implemented, what will be the new ROE?

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Tomis Company's balance sheet shows: Assets $6,500 • Contributed Capital = $3,000 . Retained Earnings = $200

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