1. (5 Pts.) A firm ROE last year was 5%, but its management has developed a new operating plan designed to improve things. The new plan calls for a total debt ratio of 60% which will result in interest charges of $8,000 per year. Management projects an EBIT of $26,000 on sales of $ 240,000, and it expects to have a total assets turnover ratio of 2.0. Under these conditions, the average tax rate will be 40%. What is the firm's expected ROE?