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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 $3 milion. AlDebt, Incorporated finances its $6 milion in assess with 55 million in
debt (on which it pays 5 percent interest annualy) and $1 milion in equity. AlEquity, Incorporated finances its $6 milion in assets with no
debt and $5 milion in equity. Both firms pey a tax rate of 40 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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