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ROIC breakdown, a firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $28
ROIC breakdown, a firms HL and LL are identical except for their leverage ratios and the interest rates they pay on debt. Each has $28 million in invested capital, has $5.6 million of EBIT, and is in the 40% federal-plus-state tax bracket. Firm HL, however, has a debt-to-capital ratio of 50% and pays 11% interest on its debt, whereas LL has a 30% debt-to-capital ratio and pays only 9% interest on its debt. Neither firm uses preferred stock in its capital structure. Calculate the return on invested capital (ROIC) for each firm. ROIC for firm LL is _____________% ROIC for firm HL is _____________%
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