onsidering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and have identical...

onsidering a stock investment in one of two firms (AllDebt, Inc., and AllEquity, Inc.), both of which operate in the same industry and have identical operating income of $7.50 million. AllDebt, Inc., finances its $35 million in assets with $34 million in debt (on which it pays 10 percent interest annually) and $1 million in equity. AllEquity, Inc., finances its $35 million in assets with no debt and $35 million in equity. Both firms pay a tax rate of 30 percent on their taxable income.