can you please help me verify the bottom as well.

not sure if right selections

thank you

5. The effect of financial leverage on ROE Companies that use debt in their capital structure are said to be using financial leverage. Using leverage can increase shareholder returns, but leverage also increases the risk that shareholders bear Consider the following case: Chilly Moose Fruit Producer 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 35%. Assuming that the project generates an expected sert (earnings before Interest and taxes) of $160,000, then Chilly Moose's anticipated ROE (return on equity) for the project will be 22.88% 16.64 21,84% 20.80% In contrast, assume that the project's EBIT is only $50,000. When calculating the tax effects, assume that the entire Chilly Moose Fruit Producer will earn a large positive income this year. The resulting ROE will be 7.80% Now consider the case of the Magic Moose Manufacturing 6.83 Magic Moose Manufacturing is considering implementing a projed bentical to that being evaluated by Chilly Moose-although Magic Moose 6.50% wants to finance the $500,000.00 in additional assets using 50% d 50% debt capital. The interest rate on Magic Moose's new debt is expected to be 12%, and the project is forecasted to generate ar 7.48% 160,000. As a result, the project is expected to generate a ROE Now consider the case of the Magic Moose Manufacturing: Magic Mouse Manufacturing is considering Implementing a project that is identical to that being evaluated by Chilly Moose-although Magic Moose wants to finance the $500,000.00 in additional assets using 50% equity and 50% debt capital. The interest rate on Magic Moose's new debt is expected to be 12%, and the project is forecasted to generate an EBIT of $160,000. As a result, the project is expected to generate a ROE of 32.11% Now assume that Magic Moose finances the same project with 50% debt and 50% equity capital, but expects it to generate an EBIT of only $50,000 Further assume that the company as a whole will generate a large, positive Income this year, such that any loss generated by the project (with its resulting tax saving) will be offset by the company's other positive) Income. Remember, the interest rate on Magic Moose's debt is 12%. Under these conditions, it is reasonable to expect that Magic Moose will generate a ROE of: 5.29% 6.76% 5.98 6.50% Given the ROE-related findings above for both Chilly Moose and Magic Moose, answer the following question: . The use of financial leverage decreases a firm's expected ROE, Increases the probability of a large loss, and consequently Increases the risk bome by the firm's stockholders The greater a firm's chance of bankruptcy, the higher its optimal debt ratio will be An aggressive manager is more likely to use debt in an effort to boost profits