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. $\begin{array}{lrllll}\text { Applicable to Both Firms }&&\text { Firm HD's Data }&&\text { Firm LD's Data }\\\text { Capital } & \$ 3,000,000 & \mathrm{w}_{\mathrm{d}} & 70 \% & \mathrm{w}_{\mathrm{d}} & 20 \% \\\text { EBIT } & \$ 595,000 & \text { Int. rate } & 12 \% & \text { Int. rate } & 10 \% \\\text { Tax rate } & 35 \% & & &\end{array}$
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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 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.

\begin{array}{lrllll}\text { Applicable to Both Firms }&&\text { Firm HD's Data }&&\text { Firm LD's Data }\\\text { Capital } & \$ 3,000,000 & \mathrm{w}_{\mathrm{d}} & 70 \% & \mathrm{w}_{\mathrm{d}} & 20 \% \\\text { EBIT } & \$ 595,000 & \text { Int. rate } & 12 \% & \text { Int. rate } & 10 \% \\\text { Tax rate } & 35 \% & & &\end{array}

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The Answer of 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. $\begin{array}{lrllll}\text { Applicable to Both Firms }&&\text { Firm HD's Data }&&\text { Firm LD's Data }\ \text { Capital } & \$ 3,000,000 & \mathrm{w}_{\mathrm{d}} & 70 \% & \mathrm{w}_{\mathrm{d}} & 20 \% \ \text { EBIT } & \$ 595,000 & \text { Int. rate } & 12 \% & \text { Int. rate } & 10 \% \ \text { Tax rate } & 35 \% & & & \end{array}$ ? A) 11.31% B) 13.37% C) 8.74% D) 10.28% E) 10.80%

Firms HD and LD Are Identical Except for Their Use