12. Gatwick Ltd. has after-tax profits (net income) of $500,000 and no debt. The owners have a $6 million equity investment in the business. If they borrow $2 million at 10% and use it to retire stock, how will the return on their investment

(equity) change if earnings before interest and taxes remains the same? Assume a flat 40% tax rate and that the loan reduces equity dollar for dollar. (A business owner’s return on investment or equity is ROI  ROE  Net income/Equity.)