If gumby pays 10 interest to debtholders and the corporate, Financial Management

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If gumby pays 10 interest to debtholders and the corporate

Gumby, Inc. has total assets of $1,000,000 and a debt-to-equity ratio of 3/7. Currently it has sales of $2,500,000, total costs (including depreciation) of $1,000,000, and EBIT of $50,000. If Gumby pays 10% interest to debtholders, and the corporate tax rate is 42%, then what is the firm's ROE.

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Financial Management: If gumby pays 10 interest to debtholders and the corporate

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