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_c) = 1 w_d declines. Other things held constant, and based on the data below, if the firm increases the percentage of debt in its capital structure (w_d) to 60.0%, by how much would the ROE change, i.e., what is ROE_New - ROE_Old? Do not round your intermediate calculations.

Operating Data			Other Data
Capital	$150,000		Old wd	5%
ROIC = EBIT (1 T)/Capital	18.00%		Old interest rate	9%
Tax rate	25%		New wd	60%
			New interest rate	11%

a. 14.03 p.p.

b. 4.61 p.p.

c. 30.42 p.p.

d. 16.36 p.p.

e. 18.71 p.p.

Southwest U's campus book store sells course packs for $15 each, the variable cost per pack is $6, fixed costs to produce the packs are $200,000, and expected annual sales are 59,000 packs. What are the pre-tax profits from sales of course packs?

a. $731,000

b. $531,000

c. $331,000

d. $154,000

e. $685,000