Fill in the table using the following information. Assets required for operation: $2,000 Case Afirm uses only equity financing Case Bfirm uses 30% debt with

Fill in the table using the following information.

Assets required for operation: $2,000

Case A—firm uses only equity financing

Case B—firm uses 30% debt with a 10% interest rate and 70% equity

Case C—firm uses 50% debt with a 12% interest rate and 50% equity

What happens to the rate of return on the stockholders’ investment as the amount of debt increases? Why did the rate of interest increase in case C?

Debt outstanding Stockholders' equity Earnings before interest and taxes Interest expense Earnings before taxes Taxes (40% of earnings) Net earnings Return on stockholders' equity 300 300 300