Problem:
If a company decides to increase its ratio of total debt / total assets from 30% to 50% as a means of increasing its return on equity (ROE), and it is able to maintain a 4.5% return on assets(ROA),
Required:
Question 1: What will be the new return on equity (ROE) after it has increased its debt level? Please illustrate out all steps in detail and provide all workings out and methods.