4. Business and financial risk Aa Aa E The impact of financial leverage on return on equity and earnings per share Consider this case: Sonaiya Development Group. 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. There will be 20,000 shares of common equity outstanding. The company faces a tax rate of 35%. Using the preceding information, what will be Sonaiya Development Group.'s return on equity (ROE) for this project? O 10.83% 10.29% 13.00% 11.91% if it finances this project with 100% Sonaiya Development Group.'s earnings per share (EPS) will be equity. Sonaiya Development Group.'s CFO is also considering financing this project with 50% debt and 50% equity. The interest rate on the company's debt will be 11%. Because the company will finance only 50% of the project with equity, it will have only 10,000 shares outstanding. What will be the ROE on this project if the company decides to finance the project with 50% debt and 50% equity? O 16.70% 14.52% 18.15% 17.42% Sonaiya Development Group.'s EPS will be if it finances this project with 50% equity and 50% debt. As a firm uses more debt in its capital structure, lenders will usually the interest rate charged