Reference no: EM132391543

Consider the following financial information for Atlas awesome Manufacturing Inc. and Delilah superior Manufacturing Inc. both companies are in the same industry and have identical operating income of $8.4 million. Atlas finances is $15 million in assets with $2 million in debt on which it pays 9% interest and $13 million in equity. Delilah finances it's $15 million in assets with $12 million in debt on which it pays 8% in interest. Both companies pay 32% tax on their taxable income.

Calculate the following:

a. Each firms net income

b. The income each firm has available to pay its debt holders and stockholders (the firms asset funders)

c. The return available to the asset funders on their investment in each company (the return on asset - funders investment)

d. Which company offers a higher return on investment to its asset funders? Explain why this company is available to offer a higher return on investments to its asset funders.