2. business & financial risk

(its all ONE question as you can see on the photo, please answer all parts clearly or do not attempt, thank you!!, as students we get limited questions and are looking for proper explanations, when you answer a part of the question & quote the policy of answering 1 "question" it doesn't serve the purpose)

2. Business and financial risk The impact of financial leverage on return on equity and earnings per share Consider the following case of Purple Panda Importers: Suppose Purple Panda Importers is considering a project that will require $350,000 in assets. - The company is small, so it is exempt from the interest deduction limitation under the new tax law. - The project is expected to produce earnings before interest and taxes (EBIT) of $55,000. - Common equity outstanding will be 25,000 shares. - The company incurs a tax rate of 25%. If the project is financed using 100% equity capital, then Purple Panda Importers's-return on equity (ROE) on the project will be (EPS) will be . In addition, Purple Panda's earnings per share Alternatively, Purple Panda Importers's CFO is also considering financing the project with 50% debt and 50% equity capital. The interest rate on the company's debt will be 10%. Because the company will finance only 50% of the project with equity, it will have only 12,500 shares outstanding. Purple Panda Importers's ROE and the company's EPS will be debt and 50% equity. agement decides to finance the project with 50% Typically, using financial leverage will a project's expected ROE. ypically, using financial leveran 2. Business and financial risk The impact of financial leverage on return on equity and earnings per share Consider the following case of Purple Panda Importers: Suppose Purple Panda Importers is considering a project that will require $350,000 in assets. - The company is small, so it is exempt from the interest deduction limitation under the new tax law. - The project is expected to produce earnings before interest and taxes (EBIT) of $55,000. - Common equity outstanding will be 25,000 shares. - The company incurs a tax rate of 25%. If the project is financed using 100% equity capital, then Purple Panda Importers's-return on equity (ROE) on the project will be (EPS) will be . In addition, Purple Panda's earnings per share Alternatively, Purple Panda Importers's CFO is also considering financing the project with 50% debt and 50% equity capital. The interest rate on the company's debt will be 10%. Because the company will finance only 50% of the project with equity, it will have only 12,500 shares outstanding. Purple Panda Importers's ROE and the company's EPS will be debt and 50% equity. agement decides to finance the project with 50% Typically, using financial leverage will a project's expected ROE. ypically, using financial leveran