The impact of financial leverage on return on equity and earnings per share Consider the following case of Purple Panda Importers: Suppose Purple Panda Importers is considering a project that will require $300,000 in assets. The project is expected to produce earnings before interest and taxes (EBIT) of $55,000. Common equity outstanding will be 30,000 shares. The company incurs a tax rate of 40%. If the project is financed using 100% equity capital, then Purple Panda Importers's return on equity (ROE) on the project will be ________. In addition, Purple Panda's earnings per share (EPS) will be ______. Alternatively, Purple Panda Importers'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 10%. Because the company will finance only 50% of the project with equity, it will have only 15,000 shares outstanding. Purple Panda Importers's ROE and the company's EPS will be _______ if management decides to finance the project with 50% debt and 50% equity. When a firm uses debt financing, the business risk exposure for the firm's common shareholders will __________