IBM Corporation has ordinary shares amounting to $4,000,000 and 8% debentures of $1,500,000. Cisco Systems has ordinary shares worth $3,500,000 and 9% debentures of $1,200,000. Intel Corporation's capital structure includes $3,200,000 in ordinary shares and $1,000,000 in 7% debentures.

In 2007, the return on capital employed for each firm was 19%, and in 2008 it was 10%. The corporation tax rate in both years was 50%, and debenture interest is deductible for tax purposes.

(a) Determine the percentage return on the shareholders' capital for each company for 2007 and 2008. Assume all profits are distributed. (b) Evaluate the pros and cons of high financial leverage for these companies.