Suppose Firms A and B have the same amount of assets, total assets are equal to total invested capital, pay the same interest rate on their debt, have the same basic earning power $($BEP$),$ finance with only debt and common equity, and have the same tax rate. However, Firm A has a higher debt to capital ratio. If BEP. is greater than the interest rate on debt, Firm A will have a higher ROE as a result of its higher debt ratio.

False

True