Exercise III. [Financial leverage] Please evaluate two entities A and B. Both have capital in the amount of 500 while the company is being fully financed by equity and the company B is financed with 40% of owner1s equity and 60% with external debt financing. Both companies have recorded the same EBIT in the amount of 160. The interest rate for external financing is being amounted at 15% and the income corporate tax rate is 19%. 1) Which of the company was more profitable from the owner`s perspective? 2) If the EBIT would equal 75 how the profitability issue would change for both companies? 3) If EBIT would equal 75 and within the capital structure of company B we would change the equity into debt how the change would have made impact on the profitability? 4) If the EBIT would equal 60 how the profitability issue would change for both companies?