Assignment 2: Chapter 4 End-of-Chapter Problems Back to Assignment Attempts 0 Keep the Highest 0/5 8. Problem 4.16 (Return on Equity) ED eBook Commonwealth Construction (CC) needs $1 million of assets to get started, and it expects to have a basic earning power ratio of 30%. CC will own no securities, all of its income will be operating income. If it so chooses, CC can finance up to 35% of its assets with debt, which will have an 8% interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a 25% tax rate on taxable income, what is the difference between CC's expected ROE if it finances these assets with 35% debt versus its expected ROE if it finances these assets entirely with common stock? Round your answer to two decimal places. percentage points Grade it Now Save & Continue Continue without saving