2. Firms HD and LD are identical except for their use of debt and the interest...

 

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2. Firms HD and LD are identical except for their use of debt and the interest rates they pay--HD has more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will HD's ROE be versus that of LD, i.e., what is ROEHD - ROELD? Applicable to Both Firms Firm HD's Data Firm LD's Data Capital $3,000,000 Wa 70% Wa 20% EBIT $435,000 Int. rate 12% Int. rate 10% Tax rate 35% 2. Firms HD and LD are identical except for their use of debt and the interest rates they pay--HD has more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will HD's ROE be versus that of LD, i.e., what is ROEHD - ROELD? Applicable to Both Firms Firm HD's Data Firm LD's Data Capital $3,000,000 Wa 70% Wa 20% EBIT $435,000 Int. rate 12% Int. rate 10% Tax rate 35%