Suppose That Chicken Express,Inc

Multiple Choice

Suppose that Chicken Express,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Chicken Express has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Chicken Express's Net Profit will be ________ and its ROE will be ________.

A) lower, lower
B) higher, higher
C) higher, lower
D) lower, higher
E) It is impossible to predict.