Explore BrainMass

Explore BrainMass

    Debt financing, debt-equity ratio

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What is the proportion of debt financing for a firm that expects a 24% return on equity, a 16% return on assets, and a 12% return on debt? Ignore taxes.
    A) 54.0%
    B) 60.0%
    C) 66.7%
    D) 75.0%

    A firm has an expected return on equity of 16% and an after-tax cost of debt of 8%. What debt-equity ratio should be used in order to keep the WACC at 12%?
    A) .50
    B) .75
    C) 1.00
    D) 1.50

    © BrainMass Inc. brainmass.com March 4, 2021, 6:40 pm ad1c9bdddf
    https://brainmass.com/business/finance/debt-financing-debt-equity-ratio-56032

    Solution Preview

    What is the proportion of debt financing for a firm that expects a 24% return on equity, a 16% return on assets, and a 12% return on debt?  Ignore taxes.
    A) 54.0%
    B) 60.0%
    C) 66.7%
    D) 75.0%

    Answer: C) 66.7%
    WACC= Return on assets = wE * Cost of ...

    Solution Summary

    Answers and explanations to 2 multiple choice questions on proportion of debt financing, debt-equity ratio

    $2.49

    ADVERTISEMENT