Suppose we are going to make an investment in machinery whose cost is 90,000 euros and we plan to obtain a return of 20%, that is, we will obtain a profit of 18,000 euros. Two scenarios are proposed for the financing of this project (in both cases we understand that all the benefit gained is liquidity):

a. Own financing 70% - External financing 30%. The total cost of external financing: 1,755 euros. Profit Tax 25%. b. Own financing 20% - Financing from others 80%. The total cost of external financing: 3,960 euros. Profit Tax 25%. Calculate the Debt Ratio

Based on the information provided and considering this operation in isolation, it analyses which of these two financing options for the project is more interesting for the profitability of the partners and the debt ratio.