Fill in the table using the following information.Assets required for operation:

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Fill in the table using the following information.Assets required for operation: $10000Firm A uses only equity financingFirm B uses 30% debt with a 6% 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: $1000A B C D AA AA B C DDebt $ $ $ $Preferred stockCommon stockEarnings before interest and taxesInterest expenseEarnings before taxesTaxes (40% of earnings)Preferred stock dividendsNet earningsReturn on common stockWhat happens to the return on the stockholders investment 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 ofdebt? Why does the use of preferred stock involve less risk for thefirm than a comparable use of debt financing?

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