Two firms have sales of $1 million each. Other financial information is as follows:

What are the operating profit margins and the net profit margins for these two firms? What is their return on equity? Why are they different? If total assets are the same for each firm, what can you conclude about their respective uses of debtfinancing?

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Firm A EBIT Interest expense Income tax Equity $150,000 20,000 50,000 300,000 Firm B $150,000 75,000 30,000 100,000