21. You get a job with a new company that plans to acquire a subsidiary of a large corporation. The problem now is how to finance the company: with only equity or with a mix of debt and equity. Expected operating income is $400,000. Other data for the firm are shown below. How much higher or lower will the firm's expected ROE be if it uses some debt rather than all equity, i.e., what is the difference in ROE when using debt versus not using debt? Oper. income (EBIT) Required investment % Debt $ of Debt $ of Common equity Interest rate Tax rate 0% Debt $400,000 $2,500,000 0.0% $0.00 $2,500,000 NA 35% 60% Debt $400,000 $2,500,000 60.0% $1,500,000 $1,000,000 10.00% 35% a. 5.85% b. 6.14% C. 6.45% d. 6.77% e. 7.11%