Suppose that you are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and have identical EBITDA of \($6.2\) million and operating incomes of \($5\) million. AllDebt, Inc., finances its \($12\) million in assets with \($11\) million in debt (on which it pays 10 percent interest, or interest payments are \($1.1\) million) and \($1\) million in equity. With

\($6.2\) million of EBITDA, AllDebt, Inc., may deduct up to \($1.86\) million (\($6.2\) × 30 percent) of interest expense for tax purposes. Thus, AllDebt, Inc., is allowed to deduct all of its interest expense. AllEquity, Inc., finances its \($12\) million in assets with no debt and \($12\) million in equity. Both firms pay 21 percent tax on their taxable income. Calculate the income that each firm has available to pay its debt and stockholders

(the firms’ asset funders) and the resulting returns to these asset funders for the two firms.