Question: Bradley Enterprises is considering two financial plans for next year. Management expects: EBIT = $ 5 0 , 0 0 0 Total assets = $

Bradley Enterprises is considering two financial plans for next year. Management expects:
EBIT=$50,000
Total assets =$200,000
Tax rate =30%
Given the company only use debt and equity to finance its asset. Plan A uses 50% debt and 50% equity with an 8% interest rate. Bondholders require a Times Interest Earned (TIE) ratio 5. Plan B maximizes debt while adhering to the TIE constraint.
Assume all operational metrics, interest rates, and tax rates remain constant. By how much does the ROE change when switching from Plan A to Plan B?
Bradley Enterprises is considering two financial

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