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? Do not round your intermediate calculations. A) 10.31% B) 11.59% C) 10.43% D) 9.15% E) 10.54%

Question

Quizplus · Accepted Answer

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? Do not round your intermediate calculations. A) 10.31% B) 11.59% C) 10.43% D) 9.15% E) 10.54%

You Have Been Hired by a New Firm That Is