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

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 Firm HD's Data Debt ratio Firm LD's Data Debt ratio Interest 10% rate 50% $300 30% $60 Interest rate EBIT 12% Tax rate 35% A. 1.97% B. 2.41% C. 2.33% OD. 2.50%

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