You start a business that requires $350,000 of capital. You decide not to borrow and invest all your money. If the business makes $60,000 of earnings before interest and income taxes in its first year of business, find your return on investment. Assume tax rate is 23%.

If you decide to borrow 40% of the required capital at an annual interest rate of 5.5%, find out the return on investment.

**SHOW CALCULATIONS:

	NO LEVERAGE	LEVERGE
Required:
Borrowed money (Debt):
Owner's investment (Equity):
Earnings before interest rate and income taxes:
Less interest:
Earnings before taxes:
Less -- Income taxes (23%):
Earnings after taxes:
Return on Investment = Earnings after taxes/equity: