Assume that an all-equity firm has $1,000 of assets and faces the possible states of nature listed in the following table: State Bad Average Good Probability 35% 25% 40% EBIT $100.00 $200.00 $300.00 Now assume that the firm plans to issue $500 of debt and use the proceeds to repurchase $500 of its own stock (capital structure would then be equal to $500 of debt and $500 of equity). Determine how much interest expense the firm can pay on the debt before the expected ROE begins to decrease. The firm's tax rate is 40 percent. O $107.50 O $105.00 O $110.00 O $102.50 $112.5