Consider the following case: Western Gas & Electric Co. is a small company and is considering a project that will require $600,000 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 $140,000? O 12.25% 10.50% 17.50% 14,88% Determine what the project's ROE will be if its EBIT it-$40,000. When calculating the tax effects, assume that Westem Gas Electric Co. as a whole will have a large positive income this year 4.000 -5.0% 4.50 5.50 Ch 14- Assignment - Capital Structure and Leverage Western Gas & Electric Co. is also considering financing the project with 50% equity and 50% debt. The interest rate on the company's debt will be 10%. What will be the project's ROE if it produces an EBIT of 5140,000? 27.50% 19:25 22.00% 31.629 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 Western Gas A Electric Co, as a whole will have a large positive Income this year. 18.379 15.754 21.00% 17.50% the The use of financial leverage the expected ROE risk bome by stockholders. The greater them's chance of bankruptcy, the is more likely to use debt in an effort to boost profits the probability of a large loss, and consequently its optimal debt ratio will be manager