1 Midwest Packaging S Roe Last Year Was Only 3 Percent But Its Management Has Develo 2841468

1. Midwest Packaging’s ROE last year was only 3 percent, but itsmanagement has developed a new operating plan designed to improve things. Thenew plan calls for a total debt ratio of 60 percent, which will result ininterest charges of $300,000 per year. Management projects an EBIT of$1,000,000 on sales of $10,000,000, and it expects to havea total assetsturnover ratio of 2.0. Under these conditions, the tax rate will be 34 percent.If the changes are made, what return on equity will the company earn?

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