Collect yourself urology physicians

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Reference no: EM131517380

Collect Yourself Urology Physicians (CYUP) provides the following data (EBIT is Earnings Before Interest and Taxes):

EBIT $60,000

Tax rate 25%

Assets $600,000

A. It’s assets are currently 100% equity financed (no debt). What is CYUP’s current ROE?

B. If they replace some Equity with 40% debt financing, at an interest rate of 8%, what is CYUP’s ROE?

C. What advice would you give CYUP regarding the addition of debt with a higher interest cost than their current ROE to their capital structure?

Reference no: EM131517380

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