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You are considering a stock ifvestment in one of two frms ( AllDebt , Incorporated and AlEquity, Incorporaned ) both of which operate in the
You are considering a stock ifvestment in one of two frms AllDebt Incorporated and AlEquity, Incorporaned both of which operate in the
same industry and have identical operating incame of $ milion. AlDebt, Incorporated finances its $ milion in assess with million in
debt on which it pays percent interest annualy and $ milion in equity. AlEquity, Incorporated finances its $ milion in assets with no
debt and $ milion in equity. Both firms pey a tax rate of percent on their tavable moome. What are the asset funders' fhe debt holders
and stockholders resulting return on assets for the two firms?
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