Overview
I'm working on a mathematics multi-part question and need an explanation and answer to help me learn.
Pacific Packaging's ROE last year was only 3%, but its management has developed a new operating plan that calls for a debt-to-capital ratio of 60%, which will result in annual interest charges of $648,000. The firm has no plans to use preferred stock, and total assets equal total invested capital. Management projects an EBIT of $1,764,000 on sales of $18,000,000, and it expects to have a total assets turnover ratio of 3.2. Under these conditions, the tax rate will be 25%. If the changes are made, what will be the company's return on equity? Do not round intermediate calculations. Round your answer to two decimal places.