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For Industry I, Frenzy is planning a $432,000 expansion to launch a new product line. Frenza currently earns $270,000 in net income, and the new
For Industry I, Frenzy is planning a $432,000 expansion to launch a new product line. Frenza currently earns $270,000 in net income, and the new product line will yield $135,000 in additional income before any interest expense. Frenza has three options: (1) do not expand, (2) expand and issue $432,000 in debt that requires payments of 8% annual interest, or (3) expand and raise $432,000 from equity financing. For each option 1, 2, and 3, compute (a) net income and (b) return on equity (Net income Equity). Ignore any income tax effects
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