Exercise $14-1($Algo$)$ Debt versus equity financing LO A$1$

Green Foods currently has $$300,000$ of equity and is planning an $$120,000$ expansion to meet increasing demand for its product. The company currently earns $$105,000$ in net income, and the expansion will yield $$52,500$ in additional income before any interest expense.

The company has three options: $(1)$ do not expand, $(2)$ expand and issue $$120,000$ in debt that requires payments of $15\%$ annual interest, or $(3)$ expand and raise $$120,000$ from equity financing. For each option, compute $($a$)$ net income and $($b$)$ return on equity $($Net Income $$ Equity$).$ Ignore any income tax effects.