You are looking at a project that will generate free cash flow after covering expenses at the end of first year of $100,000 but it will require an initial investment of $75,000. The current risk free rate is 4% but given the risk profile of this project, you believe that a 9% risk premium is appropriate.

NPV=13,495.58 ?

Value of Unlevered Equity = 75,000 + 13,495.48 = $88,495.48 (as this will be the firm value and there is no debt,equity value would be firm value) ?

Initial Market Value of Levered Equity = 100,000/1.04 = $96,153.84?

Expected Return over the Year without leverage = 96,153.84 - 88,495.48 = $7,658.36 ?

Expected Return over the Year with leverage = 100,000/1.09 -88495.48 = $3,247.63?

a) what is the Expected Return over the Year without leverage in %

b) what is Expected Return over the Year with leverage in %

c) Is the expected return on equity higher, or lower, or the same with leverage