Refer to Exhibit 2. Using the data, what conclusions should the company draw from their analysis with respect to business risk, financial risk, return on invested capital (ROI), and return on equity (ROE)?

For Question 4: Exhibit 2: A new company that plans to determine how to finance the company, with only equity or with a mix of debt and equity. Expected operating income is $500,000. Other data for the firm are shown below. 0% Debt, U 60% Debt, L $500,000 $2,500,000 0.0% Operating income (EBIT) Required investment % Debt $ of Debt $ of Common equity Shares issued, $10/share $500,000 $2,500,000 60.0% $1,500,000 $1,000,000 $0.00 $2,500,000 250,000 100,000 Interest rate on debt N/A 10.00% Tax rate 20% 20%