Firms U and L each have the same amount of assets and both havea basic earning p

Firms U and L each have the same amount of assets and both havea basic earning power ratio of 20%. Firm U is unleveraged i.e. itis 100% equity financed while Firm L is financed with 50% debt and50% equity. Firm Ls debt has a before-tax cost of 8%. Both firmshave positive net income. Which of the following statements isCORRECT?