Water and Power Co$.$ is considering a project that will require $$650,000$ in assets. The project is expected to generate an EBIT of $$140,000.$ The company faces a tax rate of $40\%.$ In terms of financing, they are considering two options.

Option $1$: Finance $100\%$ with equity.

Option $2$: Finance $50\%$ with equity and $50\%$ with debt. The interest rate on debt will be $12\%.$

You have calculated that option $1$ would generate a return on equity $($ROE$)$ of $12\mathrm{.}92\%.$ What is the difference in ROE between option $2$ and option $1?$

a$)18\mathrm{.}65\%$

b$)9\mathrm{.}32\%$

c$)-3\mathrm{.}60\%$

d$)5\mathrm{.}72\%$