after analyzing how to fund a $10,000,000 business company .

you can either take out a $10,000,000 bank loan at a 5% percent interest rate,

or you can sell a 50% stake in your business to equity investors for $10,000,000.

Suppose we project business earns a $800,000 profit during the next year.

Taxes on profits: 25%.

answer the following questions

1Calculate net profit for a fully loan funded strategy (no equity).

2 Calculate net profit for the 50% equity stake (no loan and no dividends paid).

3 Calculate the differences in benefits between the two strategies.

4Calculates the taxes to be paid for both strategies