Click here to read the eBook Business and Financial Risk FINANCIAL LEVERAGE EFFECTS Firms HL and Llare identical except for their financial leverage ratios and the Interest rates they pay on debt. Each has $11 million in invested capital, has $2.2 million of EBIT, and Is in the 40% federal-plus-state tax braccet. Firm HL, however, has a debt-to-capital ratio of 60% and pays 11% Interest on its debt, whereas that 30 debt-to-capital ratio and pays only 8% interest on its debt. Neither firm uses preferred stock in its capital structure. a. Caleviate the return on invested capital (ROIC) for each firm. Round your answers to two decimal places. ROIC for firm LLIS ROIC for firm HLS b. Calculate the rate of retum on equity (ROE) for each firm, Round your answers to two decimal places ROE for firm LL is Rot for firm HLUS c. Observing that HL has a higher HOF, LL'S treasurer is thinking of raising the debt-to-capital ratio from 30% to 60% even though that would increase Ll's interest rate all debt to 15%. Calculate the new ROE for L. Round your answer to two decimal places