Question: 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

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

Assets $400

EBIT $60

Tax rate 30%

FIRMS HD DATA

debt ratio is 50%

interest rate is 12%

FIRMS LD DATA

debt ratio os 20%

interest ratio is 8%

a. 0.98%

b. 1.02%

c. 1.42%

d. 0.87%

e. 0.95%

Please show all work

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