FIN 370 Week 5 Individual Assignment Chapter 20 Problem 1 (3) - 32140

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Firm A has $10,000 in assets entirely financed with equity. Firm B also has $10,000 in assets, but these assets are financed by $5,000 in debt (with a 10 percent rate of interest) and $5,000 in equity. Both firms sell 10,000 units of output at $2.50 per unit. The variable costs of production are $1, and fixed production costs are $12,000. 
(To ease the calculation, assume no income tax.)