Exceeds their before tax costs of debt

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Reference no: EM13883884

Company A and Company B have the same tax rate, the same total assets, and the same basic earning power. Both companies have a basic earning power that exceeds their before tax costs of debt. However, Company A has a higher debt ratio. Which of the following statements is correct?

a. Company A has higher net income than company B

b. Company B has a lower ROA than Company A

c. Company A has higher ROE than company B

d. Company B has a lower WACC than Company A

Reference no: EM13883884

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