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 pays a higher interest rate on that debt. Based on the data given below, what is the difference between the two firms' ROEs?
Applicable to Both Firms
Firm HD's Data
Firm LD's Data
Assets$200
Debt ratio50%
Debt ratio30%
EBIT$40
Interest rate12%
Interest rate10%
Tax rate25%
A. 2.51%
B. 2.65%
C. 2.79%
D. 2.93%
E. 3.07%
Answer: C
You might also like to view...
The asset created by a business when it makes a sale on account is termed
A) accounts payable B) prepaid expense C) unearned revenue D) accounts receivable
Whenever you have to communicate bad news, you have a communication challenge
Indicate whether this statement is true or false.
Kyle is evaluating solutions to fixing the leaky roof at the hockey rink he manages. Please answer the questions below. When criteria has differing importance levels, take the differences into account by assigning ____ to each option.
A. weights B. costs C. a unique ID D. a delegate
Conrad and Delilah are employees of EcoCrop Feed & Seed Corporation. Under the Equal Pay Act of 1963, EcoCrop can legitimately pay different wages on the basis of
a. seniority. b. job descriptions. c. substantial equality of skill, effort, and responsibility. d. gender.