Why companies hd and ld have the same total assets

Reference no: EM13297142

Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt. However, company HD has a higher debt ratio. Which of the following statements is CORRECT? a. Given this information, LD must have the higher ROE. b. Company LD has a higher basic earning power ratio (BEP). c. Company HD has a higher basic earning power ratio (BEP). d. If the interest rate the companies pay on their debt is more than their basic earning power (BEP), then Company HD will have the higher ROE. e. If the interest rate the companies pay on their debt is less than their basic earning power (BEP), then Company HD will have the higher ROE.

Reference no: EM13297142

Questions Cloud

What hydrodynamic model would you use for the system : Solar cookers can be used in less developed countries for cooking and also for thermal disinfection of water. To disinfect water, the water must be heated to about 35 Celsius for 5 hours. Of course, it takes time to raise the temperature of the wa..

Compute the total charge of the sphere : a sphere of radius a in free space is nonuniformly charged over its surface such that the charge density, Compute the total charge of the sphere

What interest rate is the mortgage company charging you : A mortgage company offers to lend you $85,000; the loan calls for payments of $8,538.98 at the end of each year for 30 years. What interest rate is the mortgage company charging you?

What is the average value of the sum of the dice : Consider a collection of 4 "Fermi" dice. That is, no two die may have the same face up. What is the average value of the sum of the dice

Why companies hd and ld have the same total assets : If the interest rate the companies pay on their debt is less than their basic earning power (BEP), then Company HD will have the higher ROE.

Calculate the density of the fluid : A 3.40-kg aluminum ball has an apparent mass of 2.10 kg when submerged in a particular liquid. Calculate the density of the fluid

What would be the value of this bond : What would be the value of this bond if interest rates fall to 5% seven days after it is purchased? If interest rates fell to 5% after two year, what would the bond be worth at that point?

Compute the voltage between the surface and the axis : Compute the voltage between the surface and the axis of a uniformly charged infinite cylinder of radius a

At what tax rate would an investor be indifferent : Corporate bonds issued by Johnson Corporation currently yield 11%. Municipal bonds of equal risk currently yield 6.5%. At what tax rate would an investor be indifferent between these two bonds? Round your answer to two decimal places. %

User Account

All Pages