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 60%, which will result in annual interest charges of $235,000. The firm has no plans to use preferred stock and total assets equal total invested capital Management projects an EBIT of $490,000 on sales of $5,000,000, and it expects to have a total assets turnover ratio of 2.9. Under these conditions, the tax rate will be 30%. 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. 9 Grade It Now Save & Continue Continue without saving 10. Problem 4.16 Click here to read the eBook: Profitability Ratios RETURN ON EQUITY Commonwealth Construction (CC) needs $1 million of assets to get started, and it expects to have a basic earning power ratio of 25%. CC will own no securities, so all of its income will be operating Income. If it so chooses, CC can finance up to 60% of its assets with debt, which will have an 9% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a 40% tax rate on all taxable income, what is the difference between CC's expected ROE if it finances these assets with 60% debt versus its expected ROE if it 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 $1,837,500 in current assets and $698,250 in current liabilities. Its initial Inventory level is $459,375, 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