If the company has an EBIT of $25,000,000, an interest rate of 6%, and no taxes,
what is the ROE of the firm after repurchasing shares?
Current
Structure
Proposed
Assets
$360,000,000 $360,000,000
Debt
$0
$120,000,000
Equity
$360,000,000 $240,000,000
Share price
$30
$30
8.96%
7.42%
6.82%
9.10%