A firm needs $200,000 to start and expects Sales $300,000 Expenses $285,000 Tax rate 40% a. What are earnings if the owners invest the $200,000? b. If the firm borrows 40% of the $200,000 at an...

A firm needs $200,000 to start and expects





Sales                                $300,000
Expenses                          $285,000
Tax rate                                   40%


a. What are earnings if the owners invest the $200,000?
b. If the firm borrows 40% of the $200,000 at an interest rate of 10%, what are the firm's net earnings?
c. What is the return on the owners' investment in each case? Why do the returns differ?