Question: 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

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? Please show a detail answer, step-by step.

Applicable to Both Firms Firm HD's Data Firm LD's Data

Capital	$3,000,000	wd	70%	wd	20%
EBIT	$500,000	Int. rate	12%	Int. rate	10%
Tax rate	35%

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