Last year Bania Inc. had $$350,000$ of assets, $$23,750$ of net income, and a debt ratio of $35\%.$ Now suppose

the new CFO convinces the president to increase the debt ratio to $60\%.$ Sales and total assets will not be

affected, but interest expenses would increase. However, the CFO believes that better cost controls would be

sufficient to offset the higher interest expense and thus keep net income unchanged. By how much would the

change in the capital structure improve the ROE?

$(3$ points$)$