Question: 2. Given the information in the table below, if farmer C increases his leverage from .20 to .75, what impact will this have on

2. Given the information in the table below, if farmer C increases

2. Given the information in the table below, if farmer C increases his leverage from .20 to .75, what impact will this have on the other values in the table? Compute the values and insert them into the space provided in the table [eq. 6-2: where g=(rPa-iPd)(1-t)(1-c)]. Item Balance Sheet 1. Assets 2. Debt 3. Equity Farmer C Farmer C Farmer D $860,000 $1,433,334 $143,333 $716,667 $716,667 $716,667 .20 1.50 1.00 4. Leverage (D/E) Income Statement 5. Return to assets (12% of line 1) $103,200 $172,000 6. Interest on debt (7% of line 2) -$10,033 -$50,167 7. Taxable income $93,167 $121,833 8. Taxes (20% of line 7) -$18,633 -$24,367 9. After-tax income $74,534 $97,466 10. Consumption (50% of line 9) w -$37,267 -$48,733 11. Addition to retained earnings $37,267 $48,733 12. Rate of growth of equity (line 11/line 5.200% 6.800% 3)

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