Now, to develop an example which can be presented to Bernie’s management to illustrate the effects of financial leverage, consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses $25,000 of 6 percent debt. Both firms have $100,000 in assets, a 30 percent tax rate, and an expected EBIT of $15,000. Construct partial income statements, which start with EBIT, for the two firms.