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You have the following information about two firms, Debt Free, Inc. and Debt Spree, Inc. Both firms have the same prospects for sales and EBIT,

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You have the following information about two firms, Debt Free, Inc. and Debt Spree, Inc. Both firms have the same prospects for sales and EBIT, and both have the same level of assets, tax rate and borrowing rate. They differ in their use of debt financing. Scanario Bad year Normal year Good year Sales EDIT 200 16 275 40 380 47 Total assets Tax rate Debt Equity Borrowing rate Debt Free Debt Spree 250 250 35 35 0 150 250 100 16 16. Calculate the interest expense for each firm: Interest expense for Debt Free Interest expense for Debt Spree Calculate the following items for each firm for each scenario (bad year, normal year, good year); return on assets (ROA), net profit, and return on equity (ROE) (Use a minus sign to indicate negative answers. Round your answers to 2 decimal places.) Debt Free Debt Spree Not Profit Blad year Normal year Good year Scenario ROA Net Profit ROL ROA ROK

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