The financial structure of a firm refers to the waythe firm’s assets are divided by equity and debt, and the financialleverage refers to the percentage of assets financed by the debt.In a published paper, Tai Ma of Virginia Tech claims that financialleverage can be used to increase the rate of return on equity. Tosay it is another way, stockholders can receive higher returns onthe equity with the same amount of investment by the use offinancial leverage. The following data show the rates of return onequity using 3 different levels of financial leverage and a controllevel (zero debt) for 24 randomly selected firms
Financial Leverage
Control      Low     Medium        High
2.1              6.2         9.6          10.3
5.6               4.0         8.0            6.9
3.0              8.4         5.5            7.8
7.8              2.8        12.6           5.8
5.2              4.2          7.0           7.2
2.6              5.0          7.8          12.0
Compare the mean rates of return on equity at the different levelsof financial leverage. Which of them are significantlydifferent?