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What will weather return on equity ratio be

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Question - Weather Corporation is planning its debt maturity mix. Management has chosen a debt-equity mix consisting of $20,000 of liabilities and $15,000 of owners' equity. The yield curve is currently upward sloping: the interest rate on short-term debt is 6% and the interest rate on long-term debt is 10%. Weather has $18,000 of current assets, anticipates EBIT of $4,000 and has a 40% tax rate. What will Weather's return on equity ratio be if it makes $15,000 of the liabilities short-term and $5,000 long-term?

Reference no: EM133085849

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