Requirements: The directors of the Bata company are considering an investment of 1,000,000 euros,andare wondering aboutthe most appropriate method of financing. They analyse several methods of financing in order toappreciatetheinfluence on thefinancial profitability of their company. They thereforehypothesized thefollowing:

• Debt-free financing.
• Financing at 40% by debt,interest rate10%.
• Financing at 40% by debt,interest rateand 8%.
• Financing at 60% by debt,interest rate8%.

Bearing in mind that theeconomic rateof return is 20% and that the tax rate is 30%, calculate the financial profitability of each hypothesisand comment onthe varioussituations.

	Without Loan	40% Borrowing interest rate 10%	40% Borrowing interest rate 8%	60% Borrowing interest rate 8%
Investment amount Loan Rate of return
Operating result
Financial charges
Net income
Corporate taxes
RN after Taxes
Financial profitability