(Solved): RETURN ON EQUITY Commonwealth Construction (CC) needs \( \$ 1 \) million of assets to get started, ...

RETURN ON EQUITY Commonwealth Construction (CC) needs \( \$ 1 \) million of assets to get started, and it expects to have a basic earning power ratio of \( 25 \% \). CC will own no securities, so all of its income will be operating income. If it so chooses, CC can finance up to \( 55 \% \) of its assets with debt, which will have an \( 9 \% \) interest rate. If it chooses to use debt, the firm will finance using only debt and common equity, so no preferred stock will be used. Assuming a \( 35 \% \) tax rate on all taxable income, what is the difference between CC's expected ROE if it finances these assets with \( 55 \% \) debt versus its expected ROE if it finances these assets entirely with common stock? Round your answer to two decimal places. \%