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Firms HD and LD are identical except for their use of debt and the interest rates they pay--HD has more debt and thus must pay

Firms HD and LD are identical except for their use of debt and the interest rates they pay--HD has more debt and thus must pay a higher interest rate. Both companies are small, so they are not subject to the interest deduction limitation. Based on the data given below, how much higher or lower will HD's ROE be versus that of LD, i.e., what is ROEHD - ROELD? Do not round your intermediate calculations. Applicable to Both Firms Firm HD's Data Firm LD's Data Capital $4,000,000 wd 70% wd 20% EBIT $525,000 Int. rate 11% Int. rate 9% Tax rate 25% a. 7.16 p.p. b. -2.91 p.p. c. 16.70 p.p. d. 2.95 p.p. e. -4.43 p.p.

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