Companies HD and LD Have Identical Tax Rates, Total Assets

Multiple Choice

Companies HD and LD have identical tax rates, total assets, and basic earning power ratios, and their basic earning power exceeds their before-tax cost of debt, rd However, Company HD has a higher debt ratio and thus more interest expense than Company LD Which of the following statements is CORRECT?

A) Company HD has a lower ROA than Company LD.
B) Company HD has a lower ROE than Company LD.
C) The two companies have the same ROA.
D) The two companies have the same ROE.
E) Company HD has a higher net income than Company LD.