36.There are two firms: Firm U and Firm L. Both firms have $50M total assets and $8M EBIT (earnings before interest and taxes). Firm U is an unleveraged firm without debt. Firm L is a leveraged firm with 50% of debt and 50% of common equity. The pre-tax cost of debt for Firm L is 10%. Both firms have 40% corporate tax rate. Calculate the return on equity (ROE) for firm U?

a. 9.6%

b. 13.2%

c. 16.0%

d. 19.2%

37.Based on the information from Question 36, what's the return on equity (ROE) for firm L?

a. 9.6%

b. 13.2%

c. 16.0%

d. 19.2%

38.Based on the information from Question 36, what's the difference of the total dollars paid to all investors in Firm L and Firm U?

a. $3.2 million

b. $4.8 million

c. $5.8 million

d. $1.0 million