Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets (which...

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Last year Hamdi Corp. had sales of $500,000, operating costs of$450,000, and year-end assets (which is equal to its total investedcapital) of $385,000. The debt-to-total-capital ratio was 17%, theinterest rate on the debt was 7.5%, and the firm's tax rate was35%. The new CFO wants to see how the ROE would have been affectedif the firm had used a 50% debt-to-total-capital ratio. Assume thatsales, operating costs, total assets, total invested capital, andthe tax rate would not be affected, but the interest rate wouldrise to 8.0%. By how much would the ROE change in response to thechange in the capital structure? Do not round your intermediatecalculations.

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OLD Interest Rate 75 Tax Rate 35 Assets 385000 Debt Ratio 17 Debt Asset Debt ratio 38500017 65450 Equity Assets Debt 385000 65450 319550 See Answer

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Last year Hamdi Corp. had sales of $500,000, operating costs of$450,000, and year-end assets (which is equal to its total investedcapital) of $385,000. The debt-to-total-capital ratio was 17%, theinterest rate on the debt was 7.5%, and the firm's tax rate was35%. The new CFO wants to see how the ROE would have been affectedif the firm had used a 50% debt-to-total-capital ratio. Assume thatsales, operating costs, total assets, total invested capital, andthe tax rate would not be affected, but the interest rate wouldrise to 8.0%. By how much would the ROE change in response to thechange in the capital structure? Do not round your intermediatecalculations.