Business
Business, 07.11.2019 22:31, allisonklinger1786

Firm ab and firm yz are identical except for their debt-to-total-assets ratios (d/tas) and interest rates on debt. each has $200,000 in assets, $40,000 ebit, and a 40 percent marginal tax rate. firm ab has a d/ta ratio of 40 percent and pays 7.5 percent interest on its debt, whereas yz has a 60 percent interest on its debt and pays 10 percent interest on debt. each firm has 5,000 shares of common stock outstanding. calculate each firm's eps and roe (roe = net income/equity). discuss your results.

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Firm ab and firm yz are identical except for their debt-to-total-assets ratios (d/tas) and interest...

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