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Banana News Corporation has $1.2 million market value in assets that are currently financed with 100% equity. Banana Newss EBIT is $300,000, and its tax

Banana News Corporation has $1.2 million market value in assets that are currently financed with 100% equity. Banana Newss EBIT is $300,000, and its tax rate is 30%. If Banana News changes its capital structure to include 40% debt, what is Banana Newss ROE before and after the change? Assume that image text in transcribed

35. Banana News Corporation has $1.2 million market value in assets that are currently financed with 100% equity. Banana News's EBIT is $300,000, and its tax rate is 30%. If Banana News changes its capital structure to include 40% debt, what is Banana News's ROE before and after the change? Assume that the interest rate on debt is 5%, and the company maintains it market value in assets. ROE at 100% equity ROE at 40% debt A. 17.5% B. 25.0% C. 25.0% 26.8% 26.8% 37.5%

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