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The projected EBIT of a firm is $450,000. The firm currently has 100,000 shares of common stock outstanding at a value of $16 per share.
The projected EBIT of a firm is $450,000. The firm currently has 100,000 shares of common stock outstanding at a value of $16 per share. The firm has no debt. How much will the firms ROE be if it borrows $600,000 at 12% interest and uses the funds to repurchase shares of stock at the market price? Ignore taxes.
A) 12.08%
B) 28.13%
C) 37.80%
D) 40.25%
E) 42.00%
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