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 ROE_HD - ROE_LD? Do not round your intermediate calculations.

Applicable to Both Firms			Firm HD's Data			Firm LD's Data
Capital	$3,000,000		wd	70%		wd	20%
EBIT	$595,000		Int. rate	12%		Int. rate	10%
Tax rate	35%

a. 10.28%

b. 13.37%

c. 8.74%

d. 10.80%

e. 11.31%