Question: Firm U and L differ only with respect to the use of debt. Firm U is financed by equity. It has 1000 shares at $50/per

Firm U and L differ only with respect to the use of debt. Firm U is financed by equity. It has 1000 shares at $50/per share. Firm L has $20,000 debt charging 15% interest. It has also 1000 shares, and the price of Ls share is $30.share. Assuming the tax rate is 30%, at what level of EBIT will firm U and firm L has the same ROE?

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