This weeks assignment will examine how using that can affect in organizations returns further increasing returns during periods of growth but further decreasing retire there in recessionary periods. As you can see by looking at the table below we have two firms one of which does not use that firm U in a firm that uses debt firm L. for this weeks assignments all for each organizations retires during periods of expected growth and during periods of bad growth. Assume a 40% tax rate and a 15% interest rate recall from prior chapters return on equity can be sought for as net income divided by equity or NI/E. As you can see there is truly a double edged sword please highlight all for answers and show calculations thanks

Firm U (unleveraged) Firm L (Leveraged) CA 50 Debt 0 CA 50 Debt 50 FA 50 Equity 100 FA 50 Equity 50 TA 100 100 TA 100 100 Expected Bad Expected Bad se Sales 100 82.5 Sales 100 82.5 Oper Costs 70 80 Oper Costs 70 80 EBIT 30 2.5 EBIT 30 2.5 Interest Interest EBT 30 2.5 EBT 22.5 -5 Taxes Taxes