Question: Write down the calculation steps and the parameters that you enter into your financial calculator. Commonwealth Construction (CC) needs $1 million of assets to get

Write down the calculation steps and the parameters that you enter into your financial calculator.

Commonwealth Construction (CC) needs $1 million of assets to get started, and it expects to have an EBIT of $400,000. CC will own no securities, all of its income will be operating income.

CC chooses to finance 50% of its assets with debt, which will have an 8% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. The taxi rate on taxable income is 40%.

A. How much interest CC will pay?

B. What is CCs ROE?

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