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Here are two good articles from Catholic Answers Magazine on that topic: one from Trent Horn and one by Matt Fradd. In short, and only in part, the existence of evil can be traced to the misuse of God-given free will by both fallen angels and man. In his love for these special creatures, God gave them free will to choose to love and serve him as their creator, because love coerced is not love at all.
In addition, regarding your friends’ ethical values, ask your friends how they derive their understanding of right and wrong. Quite likely, they believe that human beings, for example, have a higher dignity/worth than non-rational animals. You can thereby argue that human beings have a common and higher nature, and that our ethical code not to steal, kill innocent humans, lie, etc., points to an ethical system that transcends themselves and is indeed something we share. This common morality or ethical system points to the existence of God and our being in his image and likeness (cf. Gen. 1:26-27), whereby we know right from wrong, i.e., because the law of God is written on our heart (Rom. 2:14-16).