Question
Firm U uses 100% equity while Firm L use 60% debt and 40% equity, assume interest rate for debt is 10%, tax rate for both
Firm U uses 100% equity while Firm L use 60% debt and 40% equity, assume interest rate for debt is 10%, tax rate for both firms are 30%. If EBIT is $200,000 for both firms, what are their ROE respectively? If EBIT decreases to $80,000 for both firms, what are their ROE respectively?
** please show work, not on excel !!
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Public Finance A Contemporary Application Of Theory To Policy
Authors: David N Hyman
8th Edition
0324259700, 978-0324259704
