Pennington pizzerias roe last year was only 5 percent but, Ask an Expert

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Pennington Pizzeria's ROE last year was only 5 percent, but its management has developed a new operating plan designed to improve things. The new plan calls for a total debt ratio of 60 percent, which will result in interest charges of $8,000 per year. Management projects an EBIT of $26,000 on sales of $240,000, and it expects to have a total assets turnover ration of 2.0. Under these conditions, the average tax rate will be 40 percent. If the changes are made, what return on equity will Pennington earn?

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