Consider the following case:

Newtown Propane is a small company and is considering a project that will require $$700,000$ in assets. The project will be financed with $100\%$ equity. The company faces a tax rate of $25\%.$ What will be the ROE $($return on equity$)$ for this project if it produces an EBIT $($earnings before interest and taxes$)$ of $$145,000?$

$11\mathrm{.}66\%$

$15\mathrm{.}54\%$

$16\mathrm{.}32\%$

$9\mathrm{.}32\%$

Determine what the project$$s ROE will be if its EBIT is $$$$40,000.$ When calculating the tax effects, assume that Newtown Propane as a whole will have a large, positive income this year.

$-4\mathrm{.}3\%$

$-4\mathrm{.}08\%$

$-4\mathrm{.}94\%$

$-3\mathrm{.}44\%$

Newtown Propane is also considering financing the project with $50\%$ equity and $50\%$ debt. The interest rate on the company$$s debt will be $13\%.$ What will be the project$$s ROE if it produces an EBIT of $$145,000?$

$18\mathrm{.}12\%$

$22\mathrm{.}39\%$

$21\mathrm{.}32\%$

$14\mathrm{.}92\%$

What will be the project$$s ROE if it produces an EBIT of $$$$40,000$ and it finances $50\%$ of the project with equity and $50\%$ with debt? When calculating the tax effects, assume that Newtown Propane as a whole will have a large, positive income this year.

$-22\mathrm{.}90\%$

$-18\mathrm{.}32\%$

$-16\mathrm{.}49\%$

$-20\mathrm{.}15\%$