Question

Companies HD and LD have the same tax rate, sales, total assets, and basic earnings power. Both companies have positive net incomes. Company HD has a higher debt ratio, and therefore a higher interest expense. Which of the following is correct?

a. Company HD has a lower equity multiplier.
b. Company HD has more net income.
c. Company HD pays more in taxes.
d. Company HD has a lower ROE.
e. Company HD has a lower times-interest-earned (TIE) ratio.

Answer 1

Company HD pays less in taxes

Step-by-step explanation:

Answer 2

Company HD pays less in taxes

Step-by-step explanation:

In the case when the company HD and LD have the similar rate of tax, sales revenue, etc even both have favorable net incomes also the company Hd contains greater debt ratio due to which it has more interest expense so that means company hd would pay less taxes

Therefore the above represent the answer

and, this is the answer but the same is not provided in the given options