Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt. Each has $$25$ million in invested capital,

has $$3\mathrm{.}75$ million of EBIT, and is in the $25\%$ federal$-$plus$-$state tax bracket. Both firms are small with average sales of $$25$ million or less during the past $3$

years, so both are exempt from the interest deduction limitation$.$ Firm $HL,$ however, has a debt$-$to$-$capital ratio of $55\%$ and pays $12\%$ interest on its debt,

whereas LL has a $35\%$ debt$-$to$-$capital ratio and pays only $10\%$ interest on its debt. Neither firm uses preferred stock in its capital structure.

a$.$ Calculate the return on invested capital $($ROIC$)$ for each firm. Round your answers to two decimal places.

ROIC for firm LL:

$\%$

ROIC for firm $HL$ :

$\%$

b$.$ Calculate the return on equity $($ROE$)$ for each firm. Round your answers to two decimal places.

ROE for firm LL:

$\%$

ROE for firm $HL$ :

$\%$

$\%$

c$.$ Observing that HL has a higher ROE, LL$\text{'}$s treasurer is thinking of raising the debt$-$to$-$capital ratio from $35\%$ to $60\%$ even though that would increase

LL$\text{'}$s interest rate on all debt to $15\%.$ Calculate the new ROE for LL$.$ Round your answer to two decimal places.

$\%$