Nytac Company is considering whether to pursue a restricted or relaxed current asset investment policy. The firms annual sales are $400,000; its fixed assets are $100,000; debt and equity are each 50 percent of total assets. EBIT is $36,000, the interest rate on the firms debt is 10 percent, and the firms tax rate is 40 percent. With a restricted policy, current assets will be 15 percent of sales. Under a relaxed policy, current assets will be 25 percent of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?

a. 6.2 b. 1.6 c 5.4 d. 3.8