HD Corp and LD Corp Have Identical Assets,sales,interest Rates Paid

question 96

Multiple Choice

HD Corp and LD Corp have identical assets,sales,interest rates paid on their debt,tax rates,and EBIT.Both firms finance using only debt and common equity,and total assets equal total invested capital.However,HD uses more debt than LD.Which of the following statements is CORRECT?

• A) Without more information,we cannot tell if HD or LD would have a higher or lower net income.
• B) HD would have the lower equity multiplier for use in the DuPont equation.
• C) HD would have to pay more in income taxes.
• D) HD would have the lower net income as shown on the income statement.
• E) HD would have the higher operating margin.

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Definitions:

Margin of Error

A measure that indicates the range of values within which the true population parameter is expected to fall.

Sample Size

The number of observations or data points collected for a study or experiment.

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A Lemhi Shoshone woman who, as a teenager, helped guide and interpret for the Lewis and Clark Expedition.

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Refers to several monarchs of France, the most notable being Louis XIV, known as the Sun King, who ruled for 72 years.