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Consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses 10,000 of 12 percent debt. Both firms have 20,000

Consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses 10,000 of 12 percent debt. Both firms have 20,000 in assets, a 40 percent tax rate, and an expected EBIT of 3,000. Construct partial income statements, which start with EBIT, for the two firms.

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