Question: Return to question 5 Problem 2-21 Debt versus Equity Financing (LG2-1) 2.5 points You are considering a stock investment in one of two firms (NoEquity,

 Return to question 5 Problem 2-21 Debt versus Equity Financing (LG2-1)

Return to question 5 Problem 2-21 Debt versus Equity Financing (LG2-1) 2.5 points 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 $38.4 million and operating income of $25.5 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 not complete. NoEquity NoDebt 20.145 million $ Net income Return on assets million %

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