Companies HD and LD have identical tax rates, total assets, total investor-supplied capital, and returns on investors' capital (ROIC), and their ROICs exceed their after-tax costs of debt, rd(1 - T). However, Company HD has a higher debt ratio and thus more interest expense than Company L. Which of the following statements is CORRECT?
(a) Company HD has a higher net income than Company LD.
(b) Company HD has a lower ROA than Company LD
(c) Company HD has a lower ROE than Company LD.
(d) The two companies have the same ROA.
(e) The two companies have the same ROE.
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Companies HD and LD have identical tax rates, total assets, total investor-supplied capital, and ret...
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