What would southland net income be if it only used equity

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Reference no: EM131942795

Southland Hospital is considering a new venture that will allow it to reach patients with endocrine conditions using mobile phones and the internet. The venture will require a $8 million investment in technology and equipment. Southland Hospital can use retained earnings (equity) solely, or issue debt for 40 percent of the expenditures, at an annual interest rate of 6 percent. Operating income before taxes is forecast at $1.75 million, and Southland faces a 34 percent marginal corporate income tax rate.

A) What would Southland’s net income be if it only used equity? $

B) What would Southland's total dollar return to investors be if it only used equity? $

C) What would Southland's return on equity be if it only used equity? %

D) What would Southland’s net income be if it used 40 percent debt financing? $

E) What would Southland’s total dollar return to investors be if it used 40 percent debt financing? $

Reference no: EM131942795

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