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Firm A is very aggressive in its use of debt to leverage up its earnings for common stockholders, whereas Firm NA s not aggressive and

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Firm A is very aggressive in its use of debt to leverage up its earnings for common stockholders, whereas Firm NA s not aggressive and uses no debt. The two firms' operations are identical-they have the same total investorsupplied capital, sales, operating costs, and EBIT. Thus, they differ only in their use of financial leverage (wd). Both companies are small, so they are not subject to the interest deduction limitation. Based on the following data, how much higher or lower is A's ROE than that of NA, i.e., what is RAEAROENA ? Do not round your intermediate calculations. a. 12.50 p.p. b. 3.50 p.p. c. 4.50 p.p. d. 4.67 p.p. e. 7.25 p.p

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