Fill in the table using the following information. Assets required for operation: $11,000 Firm A uses only equity financ

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Fill in the table using the following information.Assets required for operation: $11,000Firm A uses only equity financingFirm B uses 30% debt with an 8% interest rate and 70% equityFirm C uses 50% debt with a 10% interest rate and 50% equityFirm D uses 50% preferred stock financing with a dividend rate of10% and 50% equity financingEarnings before interest and taxes: $1,100If your answer is zero, enter "0". Round your answers for monetaryvalues to the nearest cent. Round your answers for percentagevalues to one decimal place.
What happens to the common stockholders' return on equity as theamount of debt increases? Why is the rate of interest greater incase C? Why is the return lower when the firm uses preferred stockinstead of debt?
Other things equal, the return on commonstock -Select-increasesdecreasesItem 37 as the firm usesfinancial leverage. As the firm becomes -Select-lessmoreItem38 financially leveraged (-Select-increasedecreaseItem39 in financial risk), the rate of interest will increase. Thereturn is lower when the firm uses preferred stock instead of debtbecause the -Select-preferred stock dividendsinterestpaymentsItem 40 are not tax deductible as opposed tothe -Select-preferred stock dividendsinterest paymentsItem41 .
Which type of financing involves less risk for the firm?
Assuming a comparable use, -Select-preferred stockfinancingdebt financingItem 42 is less risky to the firm.