What will be the projects ROE if it produces an EBIT of $50,000 and it finances 50% of the project with equity and 50% with debt? When calculating the tax effects, assume that Newtown Propane as a whole will have a large, positive income this year. (The interest rate on the companys debt will be 10%)

-20.00%

-18.00%

-22.00%

-23.00%

Globo-Chem Co. currently is financed with 10% debt and 90% equity. However, its CFO has proposed that the firm issue new long-term debt and repurchase some of the firms common stock. Its advisers believe that the long-term debt would require a before-tax yield of 10%, while the firms basic earning power is 14%. The firms operating income and total assets will not be affected. The CFO has told the rest of the management team that he believes this move will increase the firms stock price. If Globo-Chem Co. proceeds with the recapitalization, which of the following items are also likely to increase? Check all that apply.

Net income

Cost of equity (rsrs)

Basic earning power (BEP)

Cost of debt (rdrd)

Return on assets (ROA)