Newtown Propane is a small company and is considering a project that will require $600,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be the ROE (return on equity) for this project if it produces an EBIT (earnings before interest and taxes) of $140,000?

10.50%

13.13%

14.00%

17.50%

Determine what the projects ROE will be if its EBIT is $50,000. When calculating the tax effects, assume that Newtown Propane as a whole will have a large, positive income this year.

-4.96%

-6.2%

-6.51%

-5.89%

Newtown Propane is also considering financing the project with 50% equity and 50% debt. The interest rate on the companys debt will be 10%. What will be the projects ROE if it produces an EBIT of $140,000?

26.13%

19.25%

23.38%

27.50%