Buchholz Corporation Follows a Moderate Current Asset Investment Policy, but It

Buchholz Corporation follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restricted or maybe to a relaxed policy.The firm's annual sales are $400, 000; its fixed assets are $100, 000; its target capital structure calls for 50% debt and 50% equity; its EBIT is $35, 000; the interest rate on its debt is 10%; and its tax rate is 40%.With a restricted policy, current assets will be 15% of sales, while under a relaxed policy they will be 25% of sales.What is the difference in the projected ROEs between the restricted and relaxed policies?

A) 4.25%
B) 4.73%
C) 5.25%
D) 5.78%
E) 6.35%