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Adams operates his $35000 firm using his own equity. Bob operates his firm with $17500 of his own money plus $17500 of debt at a
Adams operates his $35000 firm using his own equity. Bob operates his firm with $17500 of his own money plus $17500 of debt at a cost of 12 percent interest. Calculate Adams's and Bob's return on equity if their respective businesses produce earnings before interest and tax of $6000. Assume perfect markets. Adams's return on equity: % Bob's return on equity: %
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