Business and financial risk

1. Business and financial risk Aa Aa The impact of financial leverage on return on equity and earnings per share Consider this case: Suppose Sonaiya Development Group is considering a project that will require $350,000 in assets The project is expected to produce an EBIT (earnings before interest and taxes) of $40,000. The project will be financed with 100% equity. Common equity outstanding will be 30,000 shares. The company faces a tax rate of 35%. Using the preceding information, what will Sonaiya Development Group's return on equity (ROE) be for this project? o 7.43% O 5.94% o 6.69% O 8.17%