dy Tools Wizard Co. 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 35% What will be the Roe (return on equity) for this project if it produces an EBIT (earnings before interest and taxes) of $150,000? 10.6% Tips 17.99 Tips 13.9% OU 0163 ols Determine what the project's ROE will be if its EBIT is-555,000. When calculating the tax effects, assume that Wizard Coas a whole will have large, positive income this year. roductory (6.6% 05.11 06.09 0-9.24 Wizard Cols also considering finando the project with so muity and Sox debt. The interest rate on the company's debt will be 134 What will be the project's Roerit produces an EBIT of $150.000 24.15 2774 1841 26.5 What will be the project's ROE If it produces an EBIT of -$55,000 and it finances 50% of the project with equity and the tax effects, assume that Wizard Co. as a whole will have a large, positive Income this year, @ -20.45 24.5% - 26.5% 19:49 the probability of large loss, and consequently optimal debt ratio will be manage The use of financial leverage the expected ROE ik bome by stockholders. The greater the firm's chance of bankruptcy, the Is more likely to use debt in an effort to boost profits Grade It Now Save & Continue Continue without saving Attempts Average/5 3. The effect of financial leverage on ROE 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: Wizard Co. 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 35%. What will be the ROE (return on equity) for basis project it it produces an EBIT (earnings before Interest and taxes) of $150,0007 10.6% 17.9% 13.9% @ 16.39 Determine what the project's ROE will be if its EBIT-$55,000. When calculating the tax effects assume that wizard Co. as a whole will have a farge, positive Income this year. -6.6% 5.14 .6.09 -7.25 at will be 13. What will be -7.29 Wizard Co. is also considering financing the project with 50% equity and 50% debt. The interest rate on the company's debt will be 13%What will be the project's ROE if it produces an EBIT of $150,000? O 24.1% 27.7% 18.15 26.5% What will be the project's ROE if it produces an EBIT of $55,000 and finances 50% of the project with equity and 50% with debt? When calculating the tax effects, assume that Wizard Co. as a whole will have a large positive income this yeat, -20.4% 0 -24.5% 26.55 19.45 the probety of a large loss and consequently optimal debt ratio witte manager The use of financial leverage the expected ROE risk borne by stockholders. The greater the firm's chance of bankruptcy, the is more likely to use debt in an effort to boost profits nd Save & Continue