Companies that use debt in their capital structure are sold to be using financial leverage. Using leverage can increase shareholder returns, tot leverage also increases the risk that shareholders bear Consider the following case: Water and Power Co. is a small company and is considering a project that will require 5600,000 in assets. The project will be fitant with toos equity. The company faces a tax rate of 25%. What will be the ROE (return on equity) for this project it produces an art (aming before interest and taxes) of $150,000? O 14.06% 18.7596 15.00% O 20.63% Determine what the project's Roe will be if its EBIT is - $60,000. When calculating the tax effects, some that water and we ca a whole have a large, positive income this year. 0 -9.00% -7.12% -7.87% 0 -7.5% Water and Power Co. is also considering financing the project with 50% equity and 50debt. The interest rate on the company's debt will be What will be the project's ROE if it produces an EBIT of $150,000? 32.10% 24.86% 29.25% 27.79% What will be the project's Roeit produces an EBIT of - 560,000 and it finances 50% of the we the tax effects, assume that water and Power Co as a whole will have a large positive income this. -25.58 0.-30.22 26.74% 0.-22.23 The use of financial leverage the expected HOE tisk borne by stockholders. The greater the firm's chance of bankruptos, the is more way to use debt in an effort to boost profits