Frenza is planning an $160,000 expansion to launch a new product line. Frenza currently cams $100,000 in net income, and the new product line will yield $50,000 in additional income before any interest expense. Frenza has three options: (1) do not expand. (2) expand and issue $160,000 in debt that requires payments of 6% annual interest, or (3) expand and raise $160,000 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. (Round "Return on equity" to 1 decimal place.) Show less Don't Expand 2 Debt Financing Equity Financing Income before interest expense Interest expense Net income Equity Return on equity The founder of Frenza asks us to assist her in accounting and analysis of the corporation's bonds, which have an annual contract rate of 8%. She wants to know the business and accounting implications of further debt issuances as she looks for ways to finance the growth of Frenza. The following Tableau Dashboard is provided to help us address her questions and provide recommendations for her business decisions Frenza Bond Amortization Carrying Value Uramortized Discount $100,000 $80,000 $60,000 moes $40,000 $20,000 8 SO January 1 Year June 30, Year 1 December 31, June 30, Year 2 December 31, June 30, Year 3 December 31 Year 1 Year 2 Year 3 Cash & Inventory for Competing Companies Frenza Nelo Market Rate for Company Bonds Lika 10% Frena 8% $50,000 6%6 $40,000 496 Nelo $30,000 296 $20,000 0% $10,000 $0 Total Equity & Net Income Frenza $100,000 $190,000 $85,000 Lika Nelo Cash Cash Cash Net Income Inventory Inventory Inventor Total Equity $400.000 5530,000 $275,000 Frenza Bond Amortization Gaming Uharted Disc $100,000 80 $80,000 $60.000 90,000 1 2. . % eo h $40,000 98 ooo 9 520.000 SO anary, Taar va 30, Wear Celentar , as a vr brbr n 30, 3 Denter Vart Year New Rates for Company Market Rate for Company Bonds Cash & Inventory for Competing Companles Frenza A Lika Nelo A O $50,000 o LOW 0 7l ox O Lika 9.1. $40,000 A 0% 30, o 3 Nelo $30,000 10 29 55, 72,0 $20,000 / 7 44 OM $10,000 nu Total Equity & Net Income Free U Nalo SO Noticon $100.000 S000 000 nventory 000 000 Total faulty