Using the data provided in "Data for Question 15", demonstrate the effect that leverage would have on the Return on Equity for Firm XYZ. In the Discussion box, briefly discuss how leverage effects shareholders both in good periods and bad periods.

Data needed:

Low EBIT Unlevered ROE High EBIT Unlevered ROE Levered ROE Levered ROE Discussion (adjust cell height as necessary to fit response): A B C D E F G H 1 Total Capital Equity Portion of Capital Debt Portion of Capital Tax Rate Interest Rate LOW EBIT Unlevered Levered $50,000 $50,000 $50,000 $25,000 $0 $25,000 30% 30% N/A 7% HIGH EBIT Unlevered Levered $50,000 $50,000 $50,000 $25,000 $0 $25,000 30% 30% N/A 7% EBIT $3,000 $3,000 $10,000 $10,000