There are two firms: firm U and firm L. both firms have $50M total assists 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%