Finch, Inc, is debating whe ther or not to convert its all$-$equity capital structure to one that is

$30$ percent debt. Currendy there are $6,500$ shares outstanding and the price per share is S$51,$ EBIT

interest rate on new debt is $8$ percent and

is expected to remain at $$41,000$ per yeur forever. The there are no taxes.

$1.$ Calculate retum on equity $($ROE$)$ before any debt in inued. $($Points $1\mathrm{.}5)$

$.14\mathrm{.}24\%$

d$\mathrm{.}12\mathrm{.}37\%$

a$.11\mathrm{.}32\%$

b$,9\mathrm{.}97\%$

$11.$ Calculate return on asset $($ROA$)$ before any debt is issued. $($Points $1\mathrm{.}5)$

a$.11\mathrm{.}32\%$

b$.9\mathrm{.}97\%$

c$.14\mathrm{.}24\%$

d$\mathrm{.}12\mathrm{.}37\%$

if$.$ Calculate retum on equity $($ROE$),$ assuming the firm converts its all$-$equity capital structure to one that is $30$ percent debt. $($Points $1-5)$

$.11\mathrm{.}32\%$

b$.9\mathrm{.}97\%$

$.14\mathrm{.}24\%$

d$\mathrm{.}12\mathrm{.}37\%$

iv$.$ Calculate return on asset $($ROA$),$ assuming the firm converts its all$-$equity capital structure to one that is $30$ percent debt. $($Points $1\mathrm{.}5)$

$.11\mathrm{.}32\%$

b$.9\mathrm{.}97\%$

$.14\mathrm{.}24\%$

d$\mathrm{.}12\mathrm{.}37\%$

v$.$ If an investor buys $100$ shares and want to get the same ROE as if he$/$she bought into the proposed levered stage, how much equity he$/$she needs to use? $($Points $1\mathrm{.}5)$

a$.$ $$5100$

b$.$ $$3570$

c$.$ $$1530$

d$.$ $$2186$

vi$.$ If an investor buys $100$ shares and want to get the same ROE as if he$/$she bought into the proposed levered stage, how much debt he$/$she needs to use? $($Points $1\mathrm{.}5)$

a$.$ $$5100$

b$.$ $$3570$

c$.$ $$1530$

d$.$ $$2186$

v$.$ If an investor buys $140$ shares into the proposed levered stage and want to get the same ROE as if he$/$she bought into the unlevered stage, how much money he$/$she needs to lend? $($Points $3)$

a$,$ $$7140$

b$.$ $$3060$

c$.$ $$1530$

$4.52186$