Last Year Hamdi Corp

Last year Hamdi Corp.had sales of $500,000,operating costs of $450,000,and year-end assets (which is equal to its total invested capital) of $385,000.The debt-to-total-capital ratio was 17%,the interest rate on the debt was 7.5%,and the firm's tax rate was 35%.The new CFO wants to see how the ROE would have been affected if the firm had used a 50% debt-to-total-capital ratio.Assume that sales,operating costs,total assets,total invested capital,and the tax rate would not be affected,but the interest rate would rise to 8.0%.By how much would the ROE change in response to the change in the capital structure? Do not round your intermediate calculations.

A) 2.08%
B) 2.46%
C) 2.01%
D) 2.51%
E) 2.64%