please answer both questions
567 4.14 Pacific Packaging's ROE last year was only 4%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 45%, which will result in a $540,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,278,000 on sales of $18,000,000, and it expects to have a total assets turnover ratio of 3.6. Under these conditions, the tax rate will be 35%. If the changes are made, what will be the company's return on equity? Do not round intermediate calculations. Round your answer to two decimal places. I 4.16 Commonwealth Construction (CC) needs $3 million of assets to get started, and it expects to have a basic earning power ratio of 20%. CC will own no securities, so all of its income will be operating income. If it so chooses, CC can finance up to 55% of its assets with debt, which will have an 10% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a 35% tax rate on all taxable income, what is the difference between CC's expected ROE if it finances these assets with 55% debt versus its expected ROE iFit finances these assets entirely with common stock? Round your answer to two decimal places. - 9 L. 123 S = = = = = 56 4.14 Pacific Packaging's ROE last year was only 4%; but its management has developed a new operating plan that calls for a debt-to-capital ratio of 45%, which will result in annual interest charges of $540,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,278,000 on sales of $18,000,000, and it expects to have a total assets turnover ratio of 3.6. Under these conditions, the tax rate will be 35%. If the changes are made, what will be the company's return on equity? Do not round intermediate calculations. Round your answer to two decimal places. 4.16 Commonwealth Construction (CC) needs $3 million of assets to get started, and it expects to have a basic earning power ratio of 20%. CC will own no securities, so all of its income will be operating Income. If it so chooses, CC can finance up to 55% of its assets with debt, which will have an 10% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a 35% tax rate on all taxable income, what is the difference between CC's expected ROE if it finances these assets with 55% debt versus its expected ROE if it finances these assets entirely with common stock? Round your answer to two decimal places
