Wood and glass used to create frames for customers. The owner’s experience in seeking out the best wood and glass suppliers. Spe
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In order to find current return on equity we need to find equity , In order to find equity we may use the below logic.
Since 39% of the assets are financed by Debt, we can conclude that the remaining 61% of total assets are financed by equity. Thus, of $410000, 61% constitutes Equity, Which is $250100.
In order the find Return on Equity we may used the below formula:
Return on Equity=
Return on Equity=*100
Return on equity= 11.30%
In cash assets are reduced to $252500, and the firm expects to keep the same capital structure of 39:61, Amount of Debt will be $98475 and Equity will be $154025
Thus New Return on Equity will Be= $28250/$154025*100
Return on Equity=18.34%
Thus return on equity increases by 7% (Approximately).