No-Toxic-Toys currently has $200,000 of equity and is planning an $80,000 expansion to meet increasing demand for its product. The company currently earns $50,000 in net income, and the expansion will yield $25,000 in additional in come before any interest expense. The company has three options:

(1) Do not expand,

(2) Expand and issue $80,000 in debt that requires payments of 8% annual interest,

(3) Expand and raise $80,000 from equity financing. For each option, compute

(a) Net income

(b) Return on equity (Net income ÷ Equity). Ignore any income tax effects.