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Midwest Packaging's ROE




Midwest Packaging's ROE last year was only 2%, but its management has developed a new operating plan that calls for a debt-to-assets ratio of 50%, which will result in annual interest charges of $225,000. The firm has no plans to use preferred stock. Management projects an EBIT of $450,000 on sales of $5,000,000, and it expects to have a total assets turnover ratio of 2.5. Under these conditions, the tax rate will be 30%. If the changes are made, what will be the company's return on equity?


Paper#79653 | Written in 18-Jul-2015

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