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You are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and

You are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and have identical EBITDA of $16.2 million and operating income of $8.0 million. AllDebt, Inc., finances its $30 million in assets with $29 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Inc., finances its $30 million in assets with no debt and $30 million in equity. Both firms pay a tax rate of 21 percent on their taxable income. Calculate the income available to pay the assetfunders investment(the debt holders and stockholders) and resulting return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 3 decimal places.)

AllDebt AllEquity
Income available for asset funders million million
Return on asset-funders' investment % %

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