Click here to read the eBook: Profitability Ratios Problem Walk-Through RETURN ON EQUITY Pacific Packaging's ROE last year was only 2%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 55%, which will result in annual Interest charges of $578,000. The firm has no plans to use preferred stock and total assets equal total invested capital Management projects an EBIT of S1,428,000 on sales of $17,000,000, and it expects to have a total assets turnover ratio of 1.8. Under these conditions, the tax rate will be 40%. If the changes are made, what will be the company's return on equity? Do not round Intermediate calculations. Round your answer to two decimal places % 10. Problem 4.16 Click here to read the eBook: Profitability Ratios RETURN ON EQUITY Commonwealth Construction (CC) needs $3 million of assets to get started, and it expects to have a basic earning power ratio of 35%. CC will own no securities, so all of is income will be operating income. Yit so chooses, CC can finance up to 55% of its assets with debt, which will have an 7% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, se ne preferred stock will be used. Assuming a 35% tax rate on all taxable income, what is the difference between cs expected of finances these assets with 55% debt versus is expected ROE i finances these assets entirely with common stock? Round your answer to two decimal places Click here to read the eBook: Liquidity Ratios CURRENT RATIO The Stewart Company has $1,108,500 in current assets and $410,145 in current Habities. Its initial inventory level is $277,125, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.07 Round your answer to the nearest cent Click here to read the eBook: Asset Management Ratios Problem Walk-Through DSO AND ACCOUNTS RECEIVABLE Ingraham Inc. Currently has $440,000 in accounts receivable, and its days tales outstanding (OSO) is 62 days. It wants to reduce its DSC to 25 days by pressuring more of its customers to pay their bills on time. If this policy is adopted, the company's average sales will fall by 20%. What will be the level of accounts receivable following the change? Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent