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Last year Swensen Corp. had sales of $303,225, operating costs of $267,500, and year-end assets of...

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Finance

Last year Swensen Corp. had sales of $303,225, operating costsof $267,500, and year-end assets of $163,000. Thedebt-to-total-assets ratio was 27%, the interest rate on the debtwas 8.2%, and the firm's tax rate was 37%. The new CFO wants to seehow the ROE would have been affected if the firm had used a 45%debt ratio. Assume that sales and total assets would not beaffected, and that the interest rate and tax rate would both remainconstant. By how much would the ROE change in response to thechange in the capital structure? Select the correct answer. a.3.27% b. 4.47% c. 4.17% d. 3.87% e. 3.57%

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