Analyze Mountain Springs' ROE and TIE. That is, consturc a partial income statements for each financing alternative at each EBIT level.

Now calculate the return on equity (ROE) and times-interest-earned (TIE) ratio for each alternative at each EBIT level.

Finally, discuss the risk/retrue tradeoffs under the two financing alternatives. In your discussion, consider the expected ROE and the standard deviation of ROE under each alternative."

a. Estimate Aspeons stock price at the six levels of debt given in the case. (Hint: Use the lower half of Table 1 as a guide. Assume that all debt issued by the rm is perpetual.)