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Jacob Cornwall has a business in which hes invested $290000 of his own money, which is the firms only capital. (There are no other equity
Jacob Cornwall has a business in which hes invested $290000 of his own money, which is the firms only capital. (There are no other equity investors and no debt.) In a recent year, the firm had net income of $26000 for a return on equity of 8.97% ($26000/$290000). What will the firms return on equity be next year if net income from business operations remains the same but it borrows $100000 returning the same amount to Jake from the equity account if (Round your answer to two decimal places.):
a. The after-tax interest rate is 6%. | fill in the blank 1% |
b. The after-tax interest rate is 10%. | fill in the blank 2% |
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