The impact of financial leverage on return on equity and earnings per share Consider the following case of Free Spirit Industries Inc.: Suppose Free Spirit Industries Inc. is considering a project that will require $300,000 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 \$45,000. - Common equity outstanding will be 20,000 shares. - The company incurs a tax rate of 25%. If the project is financed using 100% equity capital, then Free Spirit Industries Inc.'s return on equity (ROE) on the project will be . In addition, Free Spirit's earnings per share (EPS) will be Alternatively, Free Spirit Industries Inc.'s CFO is also considering financing the project with 50% debt and 50% equity capital. The interest rate on the company's debt will be 11%. Because the company will finance only 50% of the project with equity, it will have only 10,000 shares outstanding. Free Spirit Industries Inc.'s ROE and the company's EPS will be __ if management decides to finance the project with 50% debt and 50% equity. Typically, using financial leverage will a project's expected ROE