CCC needs $1 million of assets to get started and expects itsbasic earning power ratio,...

CCC needs $1 million of assets to get started and expects its basic earning power ratio, BEP=EBIT/TA, to equal 30%. All of CCC’s income will be operating income. CCC can finance up to 80% of its assets with debt at 5%. Assuming a 30% tax rate, what is the ROE if the firm finances with 10% debt, AND what is the ROE if the firm finances with 80% debt?

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jeff jeffy answered 2 years ago

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