ABC Inc. has no debt and a total market value of $15 Million in the current capital stucture. The current stock price outstanding is $25 per share. The firm is proposing a capital restructuring. Under the proposed capital structure, ABC Inc. is considering a $6 Million debt issue. The proceeds will be used to repurchase part of the outstanding stock. The price per share will not change and the interest rate of debt is 14% .

There are no taxes. EBIT is expected to be $2.5 million, but could be

as high as $3.5 million if an economic expansion occurs, or as low as $2 million if a recession occurs. All values are market values.

What is ROE for the proposed capital structure if the expected EBIT occurs?