CFAI Mock 2012 Afternon Session Q28

Can someone please explain what is happening in this question? I have no idea where this formula comes from? Is it missing in Schweser Notes?

This formula as stated is in MM theory(answer has the page# of the Text. You need to calculate the r0 for the given d/e with re and rd. The plug in the r0 and find the re for the new d/e. hope this helps.