0% Debt. U $400,000 $2,500,000 Qper income (EBIT) Required investment % Debt S of Debt $ of Common equity Interest rate 60% Debt. L $400,000 $2,500,000 60.0% $1,500,000 $1,000,000 10.00% 0.0% $0.00...

You work for the CEO of a new company that plans to manufacture and sell a new product,
a watch that has an embedded TV set and a magnifying glass crystal. The issue now is
how to finance the company, with only equity or with a mix of debt and equity. Expected
operating income is P400,000. Other data for the firm are shown below. How much higher
or lower will the firm's expected ROE be if it uses some debt rather than all equity, i.e.,
what is ROEL − ROEU?

Extracted text: 0% Debt. U $400,000 $2,500,000 Qper income (EBIT) Required investment % Debt S of Debt $ of Common equity Interest rate 60% Debt. L $400,000 $2,500,000 60.0% $1,500,000 $1,000,000 10.00% 0.0% $0.00 $2,500,000 NA Таx rate 35% 35%