RETURN ON EQUITY

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 $40\%,$ which will result in annual interest charges of $$310,000.$ The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $$940,000$ on sales of $$10,000,000,$ and it expects to have a total assets turnover ratio of $3\mathrm{.}8.$ Under these conditions, the tax rate will be $30\%.$ 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.

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