provide recommendations for her business decisions. Cash & Inventory for

Competing Companies

Based on the current market rates for bonds of Frenza, Nelo, and Lika, which of the following bonds do lenders believe

has the highest risk level?

If Frenza decided to issue new bonds with a contract rate of $11\%,$ would these new bonds be sold at a discount or

premium based on the current market rate for Frenza bonds?

Frenza is planning an $$160,000$ expansion to launch a new product line. Frenza currently earns $$100,000$ in net income,

and the new product line will yield $$50,000$ in additional income before any interest expense. Frenza has three options: $(1)$

do not expand, $(2)$ expand and issue $$160,000$ in debt that requires payments of $8\%$ annual interest, or $(3)$ expand and raise

$$160,000$ from equity financing. For each option $1,2,$ and $3,$ compute $($a$)$ net income and $($b$)$ return on equity $($Net income $$

Equity$).$ Ignore any income tax effects.

Complete this question by entering your answers in the tabs below. Frenza is planning an $$160,000$ expansion to launch a new product line. Frenza currently earns $$100,000$ in net income, and the new product line will yield $$50,000$ in additional income before any interest expense. Frenza has three options: $(1)$ do not expand, $(2)$ expand and issue $$160,000$ in debt that requires payments of $8\%$ annual interest, or $(3)$ expand and raise $$160,000$ from equity financing. For each option $1,2,$ and $3,$ compute $($a$)$ net income and $($b$)$ return on equity $($Net income $$ Equity$).$ Ignore any income tax effects. $($Round "Return on equity" to $1$ decimal place.$)$

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$\backslash$table$[[1,2,3,],[$Don$\text{'}$t Expand,Debt Financing,Equity Financing,$],[$Income before interest expense,,,,,$],[$Interest expense,,,,,$],[$Net income,,,,,$],[$Equity$,,,,,],[$Return on equity,,$\%,,,]]$