Mammoth Pictures Inc. is also considering financing the project with $50\%$ equity and $50\%$ debt. The interest rate on the company's debt will be $10\%.$ What will be the project's ROE if it produces an EBIT of $$155,000?$

$33\mathrm{.}15\%$

$39\mathrm{.}00\%$

$31\mathrm{.}20\%$

$40\mathrm{.}95\%$

What will be the project's ROE if it produces an EBIT of $-$$$50,000$ and it finances $50\%$ of the project with equity and $50\%$ with debt? When calculating the tax effects, assume that Mammoth Pictures Inc. as a whole will have a large, positive income this year.

$-22\mathrm{.}50\%$

$-24\mathrm{.}75\%$

$-28\mathrm{.}12\%$

$-23\mathrm{.}62\%$

ABC Telecom Inc. currently is financed with $10\%$ debt and $90\%$ equity. However, its CFO has proposed that the firm issue new long$-$term debt and repurchase some of the firm's common stock. Its advisers believe that the long$-$term debt would require a before$-$tax yield of $10\%,$ while the firm's he believes this move will increase the firm's stock price. If ABC Telecom Inc. proceeds with the recapitalization, which of the following items are also likely to increase? Check all that apply.

Net income

Cost of debt $(r_d)$

Basic earning power $($BEP$)$

Cost of equity $(r_s)$

Return on assets $($ROA$)$

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