Question
Jacob Cornwall has a business in which hes invested $300000 of his own money, which is the firms only capital. (There are no other equity
Jacob Cornwall has a business in which hes invested $300000 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 $28000 for a return on equity of 9.33% ($28000/$300000). What will the firms return on equity be next year if net income from business operations remains the same but it borrows $130000 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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