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What will be the company return on equity

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Reference no: EM132909003

Question 1: Pomelo Company's ROE last year was only 3%; but its management has developed a new operating plan that calls for a debt-to-assets ratio of 60%, which will result in annual interest charges of P300,000. The firm has no plans to use preferred stock. Management projects an EBIT of P1,000,000 on sales of P10,000,000, and it expects to have a total assets turnover ratio of 2.0. Under these conditions, the tax rate will be 34%. If the changes are made, what will be the company's return on equity?

Reference no: EM132909003

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