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You are considering a stock investment in one of two firms both of which operate in the same industry. LotsofDebt finances with: $30m of assets,

You are considering a stock investment in one of two firms both of which operate in the same industry.

LotsofDebt finances with: $30m of assets, $29m of debt and $1m of equity.

LotsofEquity finances with $30m of assets $1m of debt and $29m of equity.

Calculate the debt ratio for the two firms.

What does your calculation tell you?

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