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n ut of Jestion Last year ABC Coprpartion had the folliang financial information 1. Total sales revenue with an amount of $500,000, 2. Total operating
n ut of Jestion Last year "ABC" Coprpartion had the folliang financial information 1. Total sales revenue with an amount of $500,000, 2. Total operating costs with an amount of $450,000, and 3. The year-end assets amounted to $395,000. 4. The debt ratio was equal to 17%, the interest rate on the debt was 7.5%, and 5. The firm's tax rate was 35%. The current CFO wants to see how the ROE would have been affected if the firm had used a 50% debt ratio. Assume that sales, operating costs, total assets, and the tax rate would not be affected, but the interest rate would rise to 8,0% 1. What is the current (old) ROE? 2. What is the new ROE? 3. By how much would the ROE change in response to the change in the capital structure
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