What Will Happen to the Required Return on Assets as a Result

question 104

Multiple Choice

What will happen to the required return on assets as a result of changing to a more debt-intensive capital structure?

• A)it will decrease.
• B)it will increase.
• C)it will remain unchanged although individual investor requirements will shift.
• D)the required rates of return for assets, debt holders, and equity holders will all remain constant.

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Definitions:

Direct Lease

A lease where the lessor purchases the asset and then leases it directly to the lessee, without using a lease intermediary.

End User

The ultimate consumer of a product or service, who uses it for its intended purpose.

Direct Lease

A lease agreement directly between a lessor and lessee, often used in commercial real estate, where the lessee assumes both the benefits and risks of asset ownership.

Independent Leasing Company

A firm that specializes in leasing equipment or vehicles to businesses or individuals, not affiliated with a manufacturer or vendor of the items leased.