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Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt, Each has $33 million in
Firms HL and LL are identical except for their financial leverage ratios and the interest rates they pay on debt, Each has $33 million in invested capital, has $7 million of EBr, and is in the 30% 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 debtto-capital ratio of 55% and pays 13.22% interest on its debt, whereas LL has a 25% debt-to-capital ratio and pays only 7.5% interest on its debt. Neither firm uses preferred stock in its capital structure. What is the retum on invested capital (ROIC) for firm HL? Blank 1 What is the return on invested capital (ROIC) for firm LL? Blank 2 What is the return on equity (ROE) for firm HL? Blank 3 What is the return on equity (ROE) for firm LL? Blank 4 Blank 1 Add your answer Blank 2 Add your answer Blank 3 Add your answer Blank 4 Add your
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