• o illustrate the effects of financial leverage for Pizza Palaces management, consider two hypothetical firms: Firm U (which uses no debt financing) and Firm L (which uses $4,000 of 8% interest rate debt). Booth firms have $20,000 in net operating capital, a 25% tax rate, and an expected EBIT of $2,400.
• • Construct the partial income statements (contained in the Ch 15 mini case spreadsheet), which start with EBIT, for the two firms.
  • Calculate NOPAT, ROIC, and ROE for both firms.
  • In a paragraph or two, explain what this example illustrates about the impact of financial leverage on ROE.
• In a paragraph or two, explain how companies manage the maturity structure of their