There are two firms: Firm U and Firm L. Both firms have $100M total assets and $16M 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 8%. Both firms have 30% corporate tax rate.

Calculate the return on equity (ROE) for firm U

Calculate the return on equity (ROE) for firm L

What is the difference in total dollars paid to all investors in firm L and firm U?