1. There are two firms: Firm U and Firm L. Both firms have $100M total assets and $20M EBIT (earnings before interest and taxes). Firm U is an unleveraged firm without debt. Firm L is a leveraged firm with 40% of debt and 60% of common equity. The pre-tax cost of debt for Firm L is 10%. Both firms have 30% corporate tax rate. Calculate the return on equity (ROE) for the unleveraged firm U and leveraged firm L. a)9.6%, 13.2% b)14.0%, 18.7% c)12.0%, 16.0% d)16.0%, 9.6%