Firms U and L Both Have a Return on Invested

question 57

Multiple Choice

Firms U and L both have a return on invested capital (ROIC) of 12% and each has the same amount of assets.Firm U is unleveraged, i.e., it is 100% equity financed, while Firm L is financed with 50% debt and 50% equity.Firm L's debt has an after-tax cost of 4.8%.Both firms have positive net income.Which of the following statements is CORRECT?

• A) Firm L has a lower ROA than Firm U.
• B) Firm L has a lower ROE than Firm U.
• C) Firm L has the higher times interest earned (TIE) ratio.
• D) Firm L has a higher EBIT than Firm U.
• E) The two companies have the same times interest earned (TIE) ratio.

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Definitions:

Female Role

The set of societal expectations, behaviors, and activities traditionally associated with women or considered appropriate for women within a specific culture.

Androgyny

The combination of masculine and feminine characteristics into an ambiguous form, often related to fashion, sexuality, and identity.

Maleness

The qualities, characteristics, or attributes considered typical of or associated with men or male organisms.

Masculinity

A set of attributes, behaviors, and roles associated with boys and men, often emphasized as part of societal norms.