Problemsims corp will buy back 900 of its 2500 shares, Ask an Expert

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Problem:

Sims Corp. will buy back 900 of its 2500 shares outstanding. The return on equity before the buy-back is 14%. The debt-to-equity ratio before the buy-back is 1. Also, the company plans to keep a constant debt level, with an interest rate of 3%. Assume no taxation and perfect capital markets.

Required:

Question: What will be the new return on equity after the buy-back?

Note: Explain in detail and show all computations in proper way.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91174441

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