Firms HD and LD Are Identical Except for Their Level

question 69

Multiple Choice

Firms HD and LD are identical except for their level of debt and the interest rates they pay on debt⎯HD has more debt and pays a higher interest rate on that debt.Based on the data given below, what is the difference between the two firms' ROEs?

• A) 2.51%
• B) 2.65%
• C) 2.79%
• D) 2.93%
• E) 3.07%

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Definitions:

Keratinocytes

Cells that make up the majority of the epidermis, producing keratin to help form a protective barrier for the skin.

Melanin

A pigment found in the skin, hair, and eyes that gives them color and offers protection against ultraviolet radiation.

Arrector Pili

Small muscles attached to hair follicles in mammals, contraction of which causes the hair to stand upright, producing goosebumps.

Hair Follicle

The skin organ that produces hair, consisting of a shaft, root, and bulb, and is connected to sebaceous glands.