l Or OUDI Inlease? WHy did the rate ot interest increase in case C? Assets required for operation: $10,000 Firm A uses only equity financing Firm B uses 30% debt with a 6% interest rate and 70% equity Firm C uses 50% debt with a 10% interest rate and 50% equity Firm and 50% equity financing Earnings before interest and taxes: $1,000 D uses 50% preferred stock financing with a dividend rate of 10% PART 4 Corporate Finance Debt Preferred stock Common stock Earnings before interest and taxes Interest expense Earnings before taxes Taxes (40% of earnings) Preferred stock dividends Net earnings Return on common stock What happens to the common stockholders' return on equity as the amount of debt increases? Why is the rate of interest greater in caseC Why is the return lower when the firm uses preferred stock instead of debt? Why does the use of preferred stock involve less risk for the firm than a comparable use of debt financing? 4. Fill in the table using the following information