Exercise 14-1 (Algo) Debt versus equity financing LO A1 Green Foods currently has $400,000 of equity and is planning an $160,000 expansion to meet increasing demand for its product. The company currently earns $80,000 in net income, and the expansion will yield $40,000 in additional income before any interest expense. The company has three options: (1) do not expand, (2) expand and issue $160,000 in debt that requires payments of 8% annual interest, or (3) expand and raise $160,000 from equity financing. For each option, compute (a) net income and (b) return on equity (Net Income + Equity). Ignore any income tax effects. Note: Round "Return on equity" to 1 decimal place. Income before interest expense Interest expense 1 Don't Expand 2 Debt Financing 3 Equity Financing Net income Equity Return on equity % % %