Last Year Swensen Corp

question 54

Multiple Choice

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 37%.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?

• A) 2.08%
• B) 2.32%
• C) 2.57%
• D) 2.86%
• E) 3.14%

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Definitions:

Blood Glucose

The main sugar found in the blood and the body’s primary source of energy; its regulation is vital for metabolic function.

Subjective Symptom

A symptom reported by the patient that cannot be directly observed by others, such as pain or dizziness.

Vital Sign

Measurements of the body's basic functions, including temperature, pulse, breathing rate, and blood pressure, used to assess physical health.

Tricuspid Valves

One of the four heart valves, located between the right atrium and right ventricle, which prevents backflow of blood.