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 $395,000.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?
A)1.71%
B)1.90%
C)2.11%
D)2.34%
E)2.58%

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The Answer of 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 $395,000.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?
A)1.71%
B)1.90%
C)2.11%
D)2.34%
E)2.58%

Last Year Hamdi Corp