Companies HD and LD Have the Same Total Assets, Total

question 78

Multiple Choice

Companies HD and LD have the same total assets, total investor-supplied capital, operating income Which of the following statements is CORRECT?

• A) HD should have a higher return on assets (ROA) than LD.
• B) HD should have a higher times interest earned (TIE) ratio than LD.
• C) HD should have a higher return on equity (ROE) than LD, but its risk, as measured by the standard deviation of ROE, should also be higher than LD's.
• D) Given that ROIC > rd(1 - T), HD's stock price must exceed that of LD.
• E) Given that ROIC > rd(1 - T), LD's stock price must exceed that of HD.

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