Pacific Packaging's ROE last year was only 2%, but its management has developed a new operating...

 

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Pacific Packaging's ROE last year was only 2%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 60%, which will result in annual interest charges of $506,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,166,000 on sales of $11,000,000, and it expects to have a total assets turnover ratio of 3.8. Under these conditions, the tax rate will be 25%. 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. % Pacific Packaging's ROE last year was only 2%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 60%, which will result in annual interest charges of $506,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,166,000 on sales of $11,000,000, and it expects to have a total assets turnover ratio of 3.8. Under these conditions, the tax rate will be 25%. 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. %

Answer rating: 100% (QA)

Net Income EBIT Enterest Expense 1 tax rate 1166000 50... View the full answer