What impact would the new capital structure have on the firms net income total dollar return to investors and ROE?

Seattle Health Plans currently uses zero-debt financing. Its operating income (EBIT) is $1 million Show more Seattle Health Plans currently uses zero-debt financing. Its operating income (EBIT) is $1 million and it pays taxes at a 40% rate. It has $5 million in assets and because it is all-equity financed $5 million in equity. Suppose the firm is considering replacing half of its equity financing with debt financing bearing an interest rate of 8 %. a. What impact would the new capital structure have on the firms net income total dollar return to investors and ROE? b- redo the analysis but now assume that the debt financing would cost 15 percent c- Report the analysis required for part a but now assume that Seattle health plan is a not for profit corporation and hence pays no taxes . Compare the results with those obtained in psrt a Show less

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