Margetis Enterprises follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restricted or maybe to a relaxed policy. The firms annual sales are $600,000; its fixed assets are $150,000; its target capital structure calls for 50% debt and 50% equity; its EBIT is $52,500; the interest rate on its debt is 10%; and its tax rate is 40%. With a restricted policy, current assets will be 15% of sales, while under a relaxed policy they will be 25% of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?

A.

5.25%

B.

12.25%

C.

15.25%

D.

20.25%