For Story $1,$ please compute Net Income, Equity, and Return on Equity.

Sales $36,900$

COGS $16,974$

Advertising $400$

Depreciation $500$

Director Salaries $7,500$

Utilities $600$

Employee Health Insurance $1,200$

Employee Salaries $3,600$

Employee Training $1,450$

R&D $4,000$

Tax rate is $40\%$

Assets $3,000$

Debt $0$

For Story $2,$ please go back to Story $1$ and change its financial structure.

Assume it has issued $1,000$ dollars of debt to buy back stock. Make the

necessary adjustments to the right side of the Balance Sheet.

Also, create a new Income Statement. Assume the rate for interest expense is $12\%.$

For Story $3,$ please go back to Story $1$ and change its financial structure.

Assume it has issued $1,500$ dollars of debt to buy back stock. Make the

necessary adjustments to the right side of the Balance Sheet.

Also, create a new Income Statement. Assume the rate for interest expense is $21\%.$

Please fill in the following chart:

Return on Equity for Story $1$

Return on Equity for Story $2$

Return on Equity for Story $3$

What is the possible improvement in ROE? $($Story $2$ minus story $1).$

A Between $0\mathrm{.}0\%$ and $2\mathrm{.}3\%$

B Between $2\mathrm{.}3\%$ and $2\mathrm{.}9\%$

C Between $2\mathrm{.}9\%$ and $3\mathrm{.}4\%$

D Between $3\mathrm{.}4\%$ and $5\mathrm{.}0\%$

From the peak to the ending ROE, what is the drop in ROE? $($Story $3$ minus story $2).$

A Between $0\mathrm{.}0\%$ and $2\mathrm{.}0\%$

B Between $2\mathrm{.}0\%$ and $2\mathrm{.}4\%$

C Between $2\mathrm{.}4\%$ and $2\mathrm{.}8\%$

D Between $2\mathrm{.}8\%$ and $5\mathrm{.}0\%$