2. Business and financial risk Aa Aa E. The impact of financial leverage on return on equity and earnings per share Consider this case: Suppose Free Spirit Industries Inc. is considering a project that will require $300,000 in assets The project is expected to produce an EBIT (earnings before interest and taxes) of $50,000 The project will be financed with 100% equity. Common equity outstanding will be 25,000 shares. The company faces a tax rate of 40%. Using the preceding information, what will Free Spirit Industries Inc. return on equity (ROE) be for this project? 8.00% 10.00% 9.00% O 11.50%