There are two firms: Firm U and Firm L. Both firms have $100M total assets and $30M EBIT (earnings before interest and taxes). Firm U is an unleveraged firm without debt. Firm L is a leveraged firm with 50% of debt and 50% of common equity. The pre-tax cost of debt for Firm L is 10%. Both firms have 30% corporate tax rate. Calculate the return on equity (ROE) for the unleveraged firm U ______

18%

21%

35%

40%

Based on the information from above Question . Calculate the return on equity (ROE) for the leveraged firm L ______

18%

21%

35%

40%