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li ''ca'd . il tmphasis Heading 1L1Normal] StrongSubtitle Title INo Spac. Paragraph Styles Why is the ROE greater than the ROA if the cost of debt is less than the ROA? Why is the ROE less than the ROA if the cost of debt is greater than the ROA? Why does the ROE equal the ROA if the cost of debt is equal to the ROA? (12 pts.) 5. 6. Use the information below to calculate the ROE for Vandelay Industries using the following interest rates (cost of debt). SHOW YOUR WORK (3 pts. each) a. 6% b. 8% c. 10% d. 12% Vandelay Industries Information Total Assets: 1,000,000 Debt-to-Equity Ratio (D/E): 1.5 ROA: 1090 What are the interpretations of the "operational ratios?" What is the sum of the operational ratios and why must this be the case? (8 pts.) 7. (More) Extra credit: Given the relationship between ROA, ROE, and interest rates (the would a business ever choose to use debt financing if interest rates were (up to 3 points) cost of debt), why greater than their expected ROA