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Firms U and L both have a return on invested capital (ROIC) of 12% and each has the same amount of assets. Firm U is
Firms U and L both have a return on invested capital (ROIC) of 12% and each has the same amount of assets. Firm U is unleveraged, i.e., it is 100% equity financed, while Firm L is financed with 50% debt and 50% equity. Firm L's debt has an after-tax cost of 4.8%. Both firms have positive net income.
Which of the following statements is CORRECT?
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