Fansworth inc wishes to calculate next years return on equity under different leverage ratios. farnsworth total assets are 18 million and its tax rate is 40 %. the company is able to estimate next years earnings for three possible states in the world. It estimates that 2019 earnings before interest and taxes will be 5 million with a .2 probability, 3 million with a .5 probability, and 500000 with a .3 probability.

1.What is the expected return on equity if the leverage ration is 10 % and the interest is 15%?