Quiz Ch 13 – Contrasting Leveraged and Unleveraged Firms: Financial Analysis

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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Comparing leveraged and unleveraged firms (Firms U and L) with the same assets and ROIC (12%). Firm L is 50% debt-financed at 8% after-tax cost, while Firm U is all-equity. Both have positive net income and a 35% tax rate. Identify the correct statement.

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