# Firms HD and LD are identical except for their level of debt

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? (Answer by calculating HD’s ROE and LD’ ROE) Applicable to Both Firms Assets \$200 EBIT \$40 Tax rate 35% Firm HD’s Data Debt ratio 50% Interest rate 12% Firm LD’s Data Debt ratio 30% Interest rate 10% 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 View complete 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? (Answer by calculating HD’s ROE and LD’ ROE) Applicable to Both Firms Assets \$200 EBIT \$40 Tax rate 35% Firm HD’s Data Debt ratio 50% Interest rate 12% Firm LD’s Data Debt ratio 30% Interest rate 10% 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? (Answer by calculating HD’s ROE and LD’ ROE) icable to Both Firms Assets \$200 EBIT \$40 Tax rate 35% Firm HD’s Data Debt ratio 50% Interest rate 12% Firm LD’s Data Debt ratio Interest rate 30% 10%

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