The impact of financial leverage on return on equity and earnings per share Consider the following case of Happy Turtle Transportation Company: Suppose Happy Turtle Transportation Company 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 10,000 shares. - The company incurs a tax rate of 25%. If the project is financed using 100\% equity captal, then Happy Turtie Trarsportation Company's return on equity (Roe) on the project will be - In addivion, Happy Turtle's earnings per share (EPS) will be Alternatively, Happy Turtie Transportation Company'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 13\%. Because the company will finance enly 50% of the project with equity. it will have only 5,000 shares outstanding. Happy Turtle Transportation Company's ROE and the company's EPS will be monagement decides to finance the project with 50% debt and 50% equity. Typically, using financial leverage will a project's expected ROE