Exercise 10-1 (Algo) Debt versus equity financing LO A1 Green Foods currently has $500,000 of...
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Exercise 10-1 (Algo) Debt versus equity financing LO A1 Green Foods currently has $500,000 of equity and is planning an $200,000 expansion to meet increasing demand for its product. The company currently earns $175,000 in net income, and the expansion will yield $87,500 in additional income before any interest expense. The company has three options: (1) do not expand, (2) expand and issue $200,000 in debt that requires payments of 9% annual interest, or (3) expand and raise $200,000 from equity financing. For each option, compute (a) net income and (b) return on equity (Net Income Equity). Ignore any income tax effects. Note: Round "Return on equity" to 1 decimal place
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