Please utilise the following key economic and financial data for the firm Sour Plum Co. The firm has an interest rate on debt of 11.0% and the cost of equity capital is 15.0%. The market value and book value of debt are approximately equal. The company has earnings before interest and tax (EBIT) of $180.0 million, debt of $1000.0 million, market value of equity of $1500.0 million and book value of equity of $600.0 million. The Sales are $400.0 million and the tax rate is 30%. Comparable firms have average interest coverage of 1.0x and average debt-to-equity ratios of 0.5x on a market value basis. They also have average EBIT/Sales ratios of 26.7%. This firm has half the proportion of variable costs to sales, versus the comparable firms. The comparables have a variable costs to sales ratio of 20.0%.

Identify the correct statement

	A.	The firms financial risk exceeds that of its comparable firms.
	B.	The firms financial risk is lower than that of its comparable firms.
	C.	The firms financial risk is equivalent to that of its comparable firms.
	D.	The firms financial risk precludes the use of the residual income model.
	E.	The firms financial risk precludes the use of the dividend discount model.