Firms HD and LD are identical except for their level of debt and the interest rates they pay on debt HD has more debt and higher interest rate on that debt. Based on the data given below, what is the difference between the two firms' ROES? pays a Applicable to Both Firms Assets EBIT Tax rate O a. 2.79% Ob. 2.51% c. 3.07% d. 2.65% Oe. 2.93% $200 $40 25% Firm HD's Data Debt ratio Interest rate 50% 12% Firm LD's Data Debt ratio Interest rate 30% 10%

Firms HD and LD are identical except for their level of debt and the interest rates they pay on debt HD has more debt and higher interest rate on that debt. Based on the data given below, what is the difference between the two firms' ROES? pays a Applicable to Both Firms Assets EBIT Tax rate O a. 2.79% Ob. 2.51% c. 3.07% d. 2.65% Oe. 2.93% $200 $40 25% Firm HD's Data Debt ratio Interest rate 50% 12% Firm LD's Data Debt ratio Interest rate 30% 10%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 7P

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