Total investor-supplied capital-returns on investors capital

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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 LD. Which of the following statements is CORRECT?

a. The two companies have the same ROA.

b. Company HD has a lower ROA than Company LD.

c. Company HD has a lower ROE than Company LD.

d. Company HD has a higher net income than Company LD.

e. The two companies have the same ROE.

Reference no: EM131545172

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