What will be roe under the new plan

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Reference no: EM131853574

ABC's return on equity (ROE) was very poor last year, but management has come up with a plan to improve things. The new plan calls for a debt ratio of 40 percent, which will generate interest expenses of $350,000 per year. Management projects that the operating profit margin will be 14.5 percent on sales of $12 million. They project a total asset turnover ratio of 2.3 and a tax rate of 40 percent. Given that information, what will be ABC's ROE under the new plan?

Please show work and formulas used.

Reference no: EM131853574

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