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

Problem 2-22 Debt versus Equity Financing (LG2-1) You are considering a stock

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 $15.5 million and operating income of $8.5 million. AllDebt, Inc., finances its $55 million in assets with $54 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Inc., finances its $55 million in assets with no debt and $55 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.) Income available for asset funders Return on asset-funders' investment es AllDebt million % AllEquity million %

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