Question: Problem 2-22 Debt versus Equity Financing (LG2-1) You are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of

Problem 2-22 Debt versus Equity Financing (LG2-1) You are considering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and have identical EBITDA of $16.4 million and operating income of $9.0 million. AllDebt, 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. AllEquity, 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 income available to pay the asset-funders' investment-(the debt holders and stockholders) and resulting return on assets for the two firms. (Enter your dollar answers in millions of dollars. Round all answers to 3 decimal places.)
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