Problem $2-21$ Debt versus Equity Financing $($LG$2-1)$

You are considering a stock investment in one of two firms $($NoEquity$,$ Inc., and NoDebt, Inc.$),$ both of which operate in the same

industry and have identical EBITDA of $$38\mathrm{.}8$ million and operating income of $$21\mathrm{.}5$ million. NoEquity, Inc., finances its $$50$ million in

assets with $$49$ million in debt $($on which it pays $10$ percent interest annually$)$ and $$1$ million in equity. NoDebt, Inc., finances its $$50$

million in assets with no debt and $$50$ million in equity. Both firms pay a tax rate of $21$ percent on their taxable income.

Calculate the net income and return on assets$-$funders' investments$-$for the two firms. $($Enter your dollar answers in millions of

dollars. Round "Net income" answers to $3$ decimal places and "Return on assets" answers to $2$ decimal places.$)$

Answer is complete but not entirely correct.