oA, ROE and ROFL and Interpret the Effects of Leverage Basic income statement and ach case, the assets are financed with a mix of non-interest-bearing liabilities, 10% interest- balance sheet information is given below for six different case s. For * and stockholders' equity. In all cases, the income tax rate is bearing liability 40% Case 0 0250 500 500 0 200 200 0300 0 0 Earnings before interest and taxes (EBiT) . . . . . . .120 120 120 80 100 80 a. For each case, calculate the return on equity (ROE), return on assets (ROA) and return on b. Consider cases A, B and C. How does increasing leverage affect the three ratios? Why does c. Consider cases C and D. When does leverage work in favor of shareholders? Does that hold d. Case F has two types of liabilities. How does ROA compare to the rate on interest-bearing financial leverage (ROFL) the ROE grow from case A to case C? for case E? liabilities? Does leverage work in favor of the shareholders? Why