Aztech has fixed costs of $$7,000,0000$ and operating earnings of $$4,000,000.$ Its capital

structure maintains a total debt ratio of $0\mathrm{.}75.$ Its competitor, ZTech, is roughly the same

size and this year earned the same operating income $($$$4,000,000).$ However, ZTech

operates with fixed costs of $$5,000,000$ and lower variable costs. It also finances more

of its long$-$term operations through equity and has a debt$-$to$-$equity ratio of $0\mathrm{.}5.$

a$)$ Which firm has higher operating leverage?

b$)$ Which firm has lower financial leverage?

c$)$ What is the equity multiplier for each firm?

d$)$ Which firm will likely have higher profits if the economy strengthens?