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CASE 8 Claire Company has $5 million in total assets. The company's assets are financed with $1 million of debt and $4 million of common equity. The company's income statement is summarized below: Operating Income (EBIT) 1,000,000 Interest 100,000 Earnings before taxes (EBT) 900,000 Taxes (40%) 360,000 Net Income 540,000 The company wants to increase its assets by $1 million, and it plans to finance this increase by issuing $1 million in new debt. This action will double the company's interest expense but its operating income will remain at 20 percent of its total assets, and its average tax rate will remain at 40 percent. 1. If the company takes this action, which of the following will occur: 2. What is the value of the new Return on Assets Ratio? 3. What is the value of the new Return in Equity