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Thornton Co . and Bentley Co . have the same sales, tax rate, total assets, and basic earning power. Both companies finance using only debt
Thornton Co and Bentley Co have the same sales, tax rate, total assets, and basic earning power. Both companies finance using only debt and common equity, with their total assets equal to total invested capital. Bentley Co has a higher debttototal capital ratio than Thornton Co resulting in a higher interest expense. Which of the following statements is CORRECT?
Bentley Co has a higher Return on Assets ROA
Bentley Co has a higher equity multiplier.
Bentley Co pays less in taxes due to higher interest expenses.
Thornton Co has a higher net income.
Thornton Co has a lower timesinterestearned TIE ratio.
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