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Companies that use debt in their capital structure are said to be using financial leverage. Using leverage can increase shareholder returns, but leverage also increases the risk that shareholders bear Consider the following case Ziff Corp. is a small company and is considering a project that will require $600,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be the ROE (return on equity) for this project if st produces an EBIT (earnings before interest and taxes) of $140,000 12.25 18.38% 10.50% O 17.50% Determine what the project's ROE will be fits ETS-845,000. When calculating the tax effects, assume that Ziff Corp. as a whole will have a large, positive Income this year 4,48% 05.6% 5,04% 6.44% the project's ROE if it produces an EBIT of $140,000? 22.00% O 27,50% 19.25 28.85% What will be the project's Roer it produces an derT of -545,000 and at finances 50% of the project with equity and son with debt? When calculating the tox effects, assume that Zil Corp. as a whole will have a large, positive Income this year. -19.69% -23.44% O-16,87% -18.75% Ziff Corp. is also considering financing the project with 50% equity and 50% debt. The interest rate on the company's debt will be 10%. What will be the project's ROE if it produces an EBIT of $140,000? 22.00% O 27.50% 19.25% 28.8896

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