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
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?
The answer should be 2.41% but I do not know how to get that answer.
| Applicable to Both Firms | Firm HD's Data | Firm LD's Data | ||||||||
| Assets | $300 | Debt ratio | 50% | Debt ratio | 30% | |||||
| EBIT | $60 | Interest rate | 12% | Interest rate | 10% | |||||
| Tax rate | 35% |
| ||||||||
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Beyond Blockchain The Death Of The Dollar And The Rise Of Digital Currency
Authors: Erik Townsend
1st Edition
172917728X, 978-1729177280
