Commonwealth Construction $($CC$)$ needs $$1$ million of assets to get started, and it expects to have a basic earning power ratio of $20\%.$ CC will own no

securities$,$ all of its income will be operating income. If it so chooses, CC can finance up to $35\%$ of its assets with debt, which will have a $12\%$ interest

rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a $25\%$ tax rate on

taxable income, what is the difference between CC$\text{'}$s expected ROE if it finances these assets with $35\%$ debt versus its expected ROE if it finances these

assets entirely with common stock? Round your answer to two decimal places.

percentage points