Devon Inc Has a Higher ROE Than Berwyn Inc

question 23

Multiple Choice

Devon Inc. has a higher ROE than Berwyn Inc. (17 percent compared to 14 percent) , but it has a lower EVA than Berwyn. Which of the following factors could explain the relative performance of these two companies?

• A) Devon is much larger than Berwyn.
• B) Devon is riskier, has a higher WACC, and a higher cost of equity.
• C) Devon has a higher operating income (EBIT).
• D) Statements a and b are correct.
• E) All of the statements above are correct.

---

Definitions:

Job Creation

The process by which new employment opportunities are generated, often considered a key indicator of economic health.

Protection

An alternative term for trade protection; policies that limit imports.

Foreign Trade

Involves the exchange of goods and services between countries, can be through importing or exporting.

Import Tariffs

Taxes imposed by a government on goods and services imported from other countries to protect domestic industries from foreign competition.