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Question 8 (5 points) Firms A and B are identical except for their use of debt and the interest rates they pay--A has more debt

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Question 8 (5 points) Firms A and B are identical except for their use of debt and the interest rates they pay--A has more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will A's ROE be versus that of B, i.e., what is ROE,A ROE,B? Do not round your intermediate calculations. Applicable to Both Firms: Capital: $3,000,000 EBIT: $500,000 Tax rate: 35% Firm A's Data: D/E: 70%/30% Interest rate: 12% Firm B's Data: D/E: 10%/90% Interest rate: 10% (Multiple Choice) 6.60% 6.29% 5.69% 5.99% 5.40%

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