By how much would the return on equity change is responding


The company has sale of $3003000 and operating cost of $267000, and net asset at the end of the year $195000, total debt to asset ratio is .7%. The interest rate on the debt is 8.2% and tax rate is 37%. The firm want to see how the return on equity would have been affected if the firm has the debt ratio of the 45% rather than 27%. Assume sale, total asset are not affect and the interest rate and tax rate are remain constant. By how much would the return on equity change is responding to change in debt ratio?

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Financial Management: By how much would the return on equity change is responding
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