Attempts: Keep the Highest: 19 1. The effect of financial leverage on ROE s Aa anies that use debt in their capital structure are said to be using financial leverage. Using leverage can increase sharehoider returns, but leverage also increases the risk that shareholders bear. Consider the following case: Universal Exports Inc. is considering a project that will require $500,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 30%, what will be the ROE (return on equity) for ths project produces an EBIT (earnings before interest and taxes) of $155,000 23.9% 16.3% 21.7% 15.2% Determine what the project's ROE will be if its EBIT is-$45,000. When calaulating the tax effects, assume that Universal Exports Inc. as a whole will have a large, positive income this year. 0-63% -5.0% 0-57% 9-69% Universal Exports Inc. is also considering financing the project with SO% equity and 50% debt. The interest rate on the company's debt will be 12%, what will be the project's ROE if it produces an Earr of $155,000? o 36.8% 40.3% 24.5% o 35.0% what will be the project's ROE rit produces an EBIT of-$45,000 and it mances SO% of the 50% with debt? When calculating the tax effects, assume that Universal Exports inc. positive income this year assume that Universal Exports Inc. as a whole will have a large, -21.0% -23.1% Q-25.2% Q-22.1% DOLL