Ajax Inc. recently completed a corporate refinancing effort which resulted in the firm taking on a D/E ratio of 1.0. Previously the firm was all equity financed. Management had predicted that the firm's ROE for it's shareholders would double and that the firm's riskiness would remain relatively unaffected. As a senior shareholder you believe management to be in error. The current Market Risk Premium is 4.0%, the Risk Free rate is 3.5% The last dividend paid was $3.50, the New Beta measurement is 1.5 and Ajax has a 40% tax rate. Based on this information which statement best reflects reality:

You are correct and management's projections were incorrect

Management was correct and your assertions were incorrect

Management was correct on return estimates but incorrect on risk measurements

Management was correct on risk measurements but incorrect on return estimates