ABC Inc. is evaluating a project that will require $800,000 in assets. The project is financed with 50% debt and 50% equity and is expected to generate earnings before interest and taxes of $120,000. The firm has a tax rate of 15% and pays 3% interest on the debt. What is the ROE (return on equity) for this project?

		16.50%
		15.00%
		22.95%
		4.05%

Determine the value of Firm A according to MM with corporate taxes, based on the following information:

EBIT: $450,000

r_d: 3%

T_c: 15%

Debt: $500,000

r_sU: 7%

		$3,333,333
		$5,464,286
		$6,428,571
		$5,539,286

Which of the following statements regarding debt in the capital structure is correct?

		Interest on debt eliminates taxable income.
		Interest on debt increases taxable income.
		Interest on debt has no effect on taxable income.
		Interest on debt reduces taxable income.

ABC Inc. is evaluating a project that will require $500,000 in assets. The project is financed with equity only and is expected to generate earnings before interest and taxes of $90,000. The firm has a tax rate of 16%. What is the ROE (return on equity) for this project?

		16%
		5%
		18%
		15.12%