: 13. Effects of leverage on return on common equity. You are in the process of organ: izing a new company to produce and sell a lady beauty product. You feel that P4 million would be enough to finance the new company's operations. You are considering following financing mix in raising the needed money for investment. Straight ordinary equity All the P4 million would be raised by issuance of ordinary shares. Shareholders' equity mix : P2.5 million would be raised from ordinaryshares issuances and P1.5 million from the sale of P100 par, 10%, preference stock. Leverage and equity mix P1.5 million would be obtained from ordinary shares issuances and P2.5 million from issuance of a 12% bonds payable. You estimated that the operations would generate an earning of P600,000 each year before interest and taxes. The tax rate is 30%. : Required: Determine the best financing mix that would maximize return on ordinary equity