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Pinkerton Packaging's ROE last year was 4.5 percent, but its management has developed a new operating plan designed to improve things. The new plan calls

  • Pinkerton Packaging's ROE last year was 4.5 percent, but its management has developed a new operating plan designed to improve things. The new plan calls for a total debt ratio of 50 percent, which will result in interest charges of $240 per year. Management projects an EBIT of $800 on sales of $8,000, and it expects to have a total assets turnover ratio of 1.6. Under these conditions, the federal-plus-state tax rate will be 40 percent. If the changes are made, what return on equity will Pinkerton earn?A.a. 2.50%
  • B.b. 13.44%
  • C.c. 13.00%
  • D.d. 14.02%
  • E.e. 14.57%

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