Commonwealth Construction (CC) needs $2 million of assets to get started, and it expects to have...

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Commonwealth Construction (CC) needs $2 million of assets to getstarted, and it expects to have a basic earning power ratio of 10%.CC will own no securities, so all of its income will be operatingincome. If it so chooses, CC can finance up to 45% of its assetswith debt, which will have an 9% interest rate. If it chooses touse debt, the firm will finance using only debt and common equity,so no preferred stock will be used. Assuming a 35% tax rate on alltaxable income, what is the difference between CC's expected ROE ifit finances these assets with 45% debt versus its expected ROE ifit finances these assets entirely with common stock? Roundyour answer to two decimal places.
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PLEASE LABEL ANSWER VERY CLEARLY

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AnswerROE with 45 debt 703ROE with 100 Equity 650Difference between CCs expected ROE it finances theseassets See Answer

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Commonwealth Construction (CC) needs $2 million of assets to getstarted, and it expects to have a basic earning power ratio of 10%.CC will own no securities, so all of its income will be operatingincome. If it so chooses, CC can finance up to 45% of its assetswith debt, which will have an 9% interest rate. If it chooses touse debt, the firm will finance using only debt and common equity,so no preferred stock will be used. Assuming a 35% tax rate on alltaxable income, what is the difference between CC's expected ROE ifit finances these assets with 45% debt versus its expected ROE ifit finances these assets entirely with common stock? Roundyour answer to two decimal places.%PLEASE LABEL ANSWER VERY CLEARLY