You have been hired by a new firm that is just being started.The CFO wants to finance with 60% debt,but the president thinks it would be better to hold the percentage of debt in the capital structure (w_d)to only 10%.Other things held constant,and based on the data below,if the firm uses more debt,by how much would the ROE change,i.e.,what is ROE_New − ROE_Old? A)5.44% B)5.73% C)6.03% D)6.33% E)6.65%

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The Answer of You have been hired by a new firm that is just being started.The CFO wants to finance with 60% debt,but the president thinks it would be better to hold the percentage of debt in the capital structure (w_d)to only 10%.Other things held constant,and based on the data below,if the firm uses more debt,by how much would the ROE change,i.e.,what is ROE_New − ROE_Old? A)5.44% B)5.73% C)6.03% D)6.33% E)6.65%

You Have Been Hired by a New Firm That Is