Canopy Growth Corporation (CGC) has $3,127,000 in assets that are currently financed with 100% equity (Before). Its EBIT is $1,170,000, and its tax rate is 37.50%. If CGC changes its capital structure to include 45% debt (After), what is its ROE before and after the change? Assume that the interest rate on debt is 5.85%. A. (Before) 19.80% (After) 47.50% B. (Before) 23.39% (After) 35.49% C. (Before) 23.39% (After) 39.53% D. (Before) 23.39% (After) 47.50%

Canopy Growth Corporation (CGC) has $3,127,000 in assets that are currently financed with 100% equity (Before). Its EBIT is $1,170,000, and its tax rate is 37.50%. If CGC changes its capital structure to include 45% debt (After), what is its ROE before and after the change? Assume that the interest rate on debt is 5.85%. A. (Before) 19.80% (After) 47.50% B. (Before) 23.39% (After) 35.49% C. (Before) 23.39% (After) 39.53% D. (Before) 23.39% (After) 47.50%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 3P

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