You are given the following information concerning a firm:
Assets required for operation: $5,900,000
Revenues: $8,300,000
Operating expenses: $7,650,000
Income tax rate: 40%.
Management faces three possible combinations of financing:
100% equity financing
25% debt financing with a 8% interest rate
50% debt financing with a 8% interest rate
What is the net income for each combination of debt and equity financing? Round your answers to the nearest dollar.
1 2 3
Net income $ $ $ What is the return on equity for each combination of debt and equity financing? Round your answers to one decimal place.