Spruce Grove Ltd

question 84

Multiple Choice

Spruce Grove Ltd.has total assets of $5 million and is currently financed entirely with equity.Spruce Grove Ltd.estimates that it could borrow money at a rate of 8%, and their current tax rate is 25%.Last year they earned net income of $200,000.What would their return on equity be if they financed their operations with 40% debt?

• A)1.33%
• B)2.67%
• C)4.00%
• D)8.00%

---

Definitions:

Ethically Use

Refers to the principle of applying morals and values to ensure fairness, respect, and integrity in practices and decisions.

Influencing Behavior

The act of altering or guiding an individual's actions, decisions, or attitudes through various means like persuasion, reinforcement, or manipulation.

Suppressive Effects

The diminution or reduction of a biological or psychological response due to an external intervention, stimulus, or condition.

Punishment

The application of a stimulus that decreases the probability of a behavior being repeated, often by introducing an adverse consequence or removing a positive one.