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Your firm's debt ratio is only 5.00%, but the new CFO thinks that more debt should be employed. She wants to sell bonds and use
Your firm's debt ratio is only 5.00%, but the new CFO thinks that more debt should be employed. She wants to sell bonds and use the proceeds to buy back and retire common shares so the percentage of common equity in the capital structure (w) = 1 - wd. Other things held constant, and based on the data below, if the firm increases the percentage of debt in its capital structure (wd) to 60.0%, by how much would the ROE change, i.e., what is ROENew - ROEold? Do not round your intermediate calculations. 596 Operating Data Capital ROIC = EBIT (1 - T)/Capital Tax rate $150,000 30.0096 Other Data old wa Old interest rate New Wd New interest rate 1096 2596 6096 1296 a. 30.3296 b. 28.649 C. 31.0096 d. 29.1696 e. 29.6996
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