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?

A) 2.18%
B) 2.29%
C) 2.41%
D) 2.54%
E) 2.66% Hard:

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 a higher interest rate on that debt. Based on the data given below, what is the difference between the two firms' ROEs?

A) 2.18% 
B) 2.29% 
C) 2.41% 
D) 2.54% 
E) 2.66% Hard:

Quizplus · Accepted Answer

The Answer 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?

A) 2.18% 
B) 2.29% 
C) 2.41% 
D) 2.54% 
E) 2.66% Hard:

Firms HD and LD Are Identical Except for Their Level