Last year, Jandik Corp. had $250,000 of assets, $18,750 of net income, and a debt-to-total-assets ratio of 37%. Now, suppose the new CFO convinces the president to increase the debt ratio to 48%. Sales and total assets will remain unaffected, but interest expenses would rise. However, the CFO believes that better cost controls would suffice to offset the higher interest expense and keep net income unchanged. By how much would the change in the capital structure improve the ROE?
a) 2.09%
b) 2.19%
c) 2.14%
d) 2.52%
e) 2.37%
