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A company has no debt outstanding and a total market value of $186,000. Earnings before interest and taxes, EBIT, is projected to be $34,000 if
A company has no debt outstanding and a total market value of $186,000. Earnings before interest and taxes, EBIT, is projected to be $34,000 if economic conditions are normal. If there is a good surprise, then EBIT will be 41 percent higher. If there is a bad surprise, then EBIT will be 33 percent lower. There are currently 7,500 shares outstanding. Assume the market-to-book ratio is 1.0, the total market value remains constant, and there are no taxes for this problem. What will return on equity, ROE, be if there is good surprise? Enter your answer in the box shown below as a decimal number (not as a percentage) with 4 digits to the right of the decimal point
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