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Last Year Swensen Corp

question 88

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Last year Swensen Corp.had sales of $303,225, operating costs of $267,500, and year-end assets of $195,000.The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, 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 45% debt ratio.Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant.By how much would the ROE change in response to the change in the capital structure?


Definitions:

Operating Plans

Detailed outlines of how organizational goals will be achieved within a specific period of time, detailing the resources, tasks, and schedules required.

Behavior Modification

The use of empirical and operant conditioning techniques to change undesirable behaviors into more desirable ones.

Organizational Learning

The process by which an organization improves its ability to achieve goals through the acquisition and application of knowledge.

Political Skills

The ability to effectively navigate organizational politics and influence others to achieve goals.

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