Firm a Is Very Aggressive in Its Use of Debt

question 66

Multiple Choice

Firm A is very aggressive in its use of debt to leverage up its earnings for common stockholders,whereas Firm NA is not aggressive and uses no debt.The two firms' operations are identical--they have the same total investor-supplied capital,sales,operating costs,and EBIT.Thus,they differ only in their use of financial leverage (w_d) .Based on the following data,how much higher or lower is A's ROE than that of NA,i.e. ,what is ROE_A - ROE_NA? Do not round your intermediate calculations. ​

• A) 4.90%
• B) 3.71%
• C) 4.58%
• D) 5.54%
• E) 3.76%

---

Definitions:

Immanent Justice

The belief, particularly common in children, that moral behavior is immediately rewarded and immorality is instantly punished in a natural or magical manner.

Postconventional Morality

A stage in Kohlberg's theory of moral development where an individual's sense of morality is defined by internal principles, and social rules are seen as relative and not absolute.

Conventional Morality

A stage in Kohlberg's theory of moral development where individuals make moral decisions based on societal norms and laws.

Preconventional Morality

The first level in Kohlberg's stages of moral development, where moral reasoning is based primarily on consequences and personal gain.