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Fill in the table using the following information. Assets required for operation: $9,400 Firm A uses only equity financing Firm B uses 30% debt with a 6% interest rate and 70% equity Firm C uses 50% debt with a 10% interest rate and 50% equity Firm D uses 50% preferred stock financing with a dividend rate of 10% and 50% equity financing Earnings before interest and taxes: $940 If your answer is zero, enter "0". Round your answers for monetary values to the nearest cent. Round your answers for percentage values to one decimal place. What happens to the common stockholders' return on equity as the amount of debt increases? Why is the rate of interest greater in case C? Why is the return lower when the firm uses preferred stock instead of debt? Other things equal, the return on common stock as the firm uses financial leverage. As the firm becomes financially leveraged in financial risk), the rate of interest will increase. The return is lower when t jreferred stock instead of debt because the are not tax deductible as opposed to the Which type of financing involves less risk for the firm? Assuming a comparable use, is less risky to the firm. e. As the firm becomes: cause the -Select- reases? Why is the rate of interest greater in case C? Why is the return lower when the firm uses preferred leverage. As the firm becomes financially leveraged in financial risk), the rate of debt because the are not tax deductib d to the Taxes ( 40% of earnings) Preferred stock dividends Income available to common stockholders Return on common stock What happens to the common stockholders' return on equity stock instead of debt? Other things equal, the return on common stock interest will increase. The return is lower when the firm uses ivolves less risk for the firm? Assuming a comparable use, is less unt of debt increases? Why is the rate of interest greater in case C? Why is the return lower uses financial leverage. As the firm becomes financially leveraged I stock instead of debt because the are not tax deductible as opposed \begin{tabular}{|l|} \hline -Select- \\ \hline preferred stock dividends interest payments \\ \hline \end{tabular} Which type of financing involves less risk for the firm? Assuming a comparable use, is less risky to the firm

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