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Business, 27.08.2019 03:20 flixtier

Companies hd and ld have the same total assets, total investor-supplied capital, operating income (ebit), tax rate, and business risk. company hd, however, has a much higher debt ratio than ld. also, both companies' returns on investors' capital (roic) exceed their after-tax costs of debt, rd(1 – t). which of the following statements is correct? a. given that roic > rd(1 – t), ld's stock price must exceed that of hd. b. hd should have a higher times interest earned (tie) ratio than ld. c. given that roic > rd(1 – t), hd's stock price must exceed that of ld. d. hd should have a higher return on assets (roa) than ld. e. hd should have a higher return on equity (roe) than ld, but its risk, as measured by the standard deviation of roe, should also be higher than ld's.

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