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I can't figure out the AllDebt answers. The AllEquity ones listed are correct. The AllDebt income available is NOT 7 mil or 10 mil Problem
I can't figure out the AllDebt answers. The AllEquity ones listed are correct. The AllDebt income available is NOT 7 mil or 10 mil
Problem 2-20 Debt versus Equity Financing (LG2-1) You are considering a stock investment in one of two firms (AlIDebt, Inc., and AlIEquity, Inc), both of which operate in the same industry and have identical operating income of $12.00 million. AlIDebtInc., finances its $20 million in assets with $19 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AlIEquity, Inc, finances its $20 million in assets with no debt and $20 million in equity. Both firms pay a tax rate of 30 percent on their taxable income. Calculate the income available to pay the asset funders (the debt holders and stockholders) and resulting return on asset-funders' investment for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 2 decimal places.) AIDebt 11.01m AlIEquity $ 8.4 m Income available for asset funders Return on asset-funders' investment 50.50 % 42 %Step by Step Solution
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