You are a CFO and these are the numbers in your company: Assets required for operation: $5,000,000; Revenues: $8,400,000; Operating expenses: $7,900,000; Income Tax Rate: 40%. You can do three possible combinations of financing: 100% equity financing 30% debt financing with a 6% interest rate; 605 debt financing with a 6% interest rate

a. What is the return on equity for each combination of debt and equity financing? b. What is the net income for each combination of debt and and equity financing?

b. What is the net income for each combination of debt and equity financing?

c. If the interest rate has been 12 percent instead of 6 percent, what would be the return on equity for each combination of det and equity financing.