REQUIRED: answer 2 only

1120W, calculate Question 2A-ES09 (EBIT), and both are subject to a 40% income tax rate. Knight finances 30% of its at a before-tax cost of 15%. Questions 1. Develop a summary balance sheet and a summary income statement for each of the two companies based on the information provided. Round dollar amounts to the nearest million. 2. Calculate the return on equity for each company, to the nearest tenth of a percent. 3. Based on the information given, identify which company has the higher level of risk. Explain your answer. 4. Describe and explain four implications (or costs) of financial distress. Knight, Inc. and Day, Ltd. are large firms in the same industry. Each firm has $200 million of assets and produces $50 million of earnings before interest and taxes assets with debt at a before-tax cost of 10%. Day finances 60% of its assets with debt