Suppose Lost Pigeon Avlation is considering a project that will require \\( \\$ 350,000 \\) in assets. - The company is small, so it is exempt from the interest deduction limitation under the new tax law. - The project is expected to produce earnings before interest and taxes (EBIT) of \\( \\$ 40,000 \\). - Common equity outstanding will be 15,000 shares. - The company incurs a tax rate of \25. If the project is nnanted using 100\\% equity copital, then Lost Pigeon Aviation's return on equity (ROE) on the project will be addition, Lost Pigeon's earnings per share (EPS) will be Alternatively, Lost Pigeon Aviation's CFO is also considering financing the project with \50 debt and \50 equity capital, The interest rote on the company's debt will be \11. Because the company will finance only 50\\% of the project with equity, it will have oniy 7,500 shares outstanding. Lost Pigeon Aviation's ROE and the company's EPS will be If management decides to finance the project with so\\% debt and \50 equity. Typically, using financial leverage will a project's expected ROE