Last year Hamdi Corp. had sales of $500,000, operating costs of $450,000, and year-end assets (which is equal to its tot

[answerhappygod]

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 $425,000. The debt-to-total-capital ratio was 17%, the
interest rate on the debt was 7.5%, and the firm's tax rate was
25%. 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.1.97%
B. 2.43%
C. 1.95%
D. 2.17%
E. 2.71%