Seatle health plans currently uses zero-debt financing. It's operating income is $1 million and it pays taxes at a 40% rate. It has $5 million in assests and because it is all-equity financed, $5 million in equity. Suppose the firm is considering replacing half of its equity financing with debt financing bearing an interest rate of 8%.

What impact would the new captial structure have on the firm's net income, total dollar return on investors, and ROE?