=+LG 2 P13–16 Integrative: Leverage and risk Firm R has sales of 100,000 units at $2.00 per unit, variable operating costs of $1.70 per unit, and fixed operating costs of $6,000.

Interest is $10,000 per year. Firm W has sales of 100,000 units at $2.50 per unit, variable operating costs of $1.00 per unit, and fixed operating costs of $62,500.

Interest is $17,500 per year. Assume that both firms are in the 40% tax bracket.