Question
The projected EBIT of a firm is $300,000. The firm currently has 100,000 shares of common stock outstanding at a value of $18 per share.
The projected EBIT of a firm is $300,000. The firm currently has 100,000 shares of common stock outstanding at a value of $18 per share. The firm has no debt. By how much will the ROE change if the firm borrows $600,000 at 8% interest and uses the funds to repurchase shares of stock at the market price? Ignore taxes.
Multiple Choice
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5.67%
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-2.67%
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4.33%
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1.67%
-
2.33%
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The Ultra High Net Worth Bankers Handbook
Authors: Heinrich Weber, Stephan Meier
1st Edition
1905641753, 978-1905641758
