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Sorry for not posting in the BEC study group…can’t find where it will let me do so? Anyway – confused on this question from NINJA MCQ.
Spear Corp. had sales of $2,000,000, a profit margin of 11%, and assets of $2,500,000. Spear decided to reduce its debt ratio to 0.40 from 0.50 by selling new common stock and using the proceeds to repay principal on some outstanding long-term debt. After the refinancing, what is Spear’s return on equity?
A.
3.5%
B.
5.3%
C.
14.7%
D.
22.9%
FAR - 87 (5/15)
AUD - 93 (8/15)
REG - 86 (2/16)
BEC - 87 (5/16)
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