There are two firms : firm U and firm L. both firms have $50M total assests and $8M EBIT (earnings before interest and taxes).. firm U is an unleveraged firm without debt. Firm L ia a leveraged firm with 50% of debt and 50% of common equity. the pre-tax cost of debt for firm L is 10%. Both firms have 40% corporate tax rate. Calculate the return on equity(ROE) for firm U.
A) 9.6%
B) 13.2%
C) 16.0%
D) 19.2%