Larry Is Trying to Decide Whether to Purchase a New

question 38

Multiple Choice

Larry is trying to decide whether to purchase a new bulldozer to expand his business.He is confident he has enough work to keep the bulldozer busy and that repaying the loan will not be a problem.What advice would you give Lance?

• A)If the interest rate on the loan is less than the return on assets for the bulldozer, buy.
• B)If the return on this asset is more than the return on his equity, don't buy.
• C)If his current return on equity is greater than the return on this asset, buy.
• D)If his total asset turnover rate is greater than one, don't buy.

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