If a Firm Is 100% Equity-Financed, Then

question 28

Multiple Choice

If a firm is 100% equity-financed, then

• A)the asset beta will be greater than it would have if the firm had used debt financing.
• B)the asset beta will be greater than the market beta of the equity.
• C)the asset beta will be less than the market beta of the equity.
• D)the asset beta will equal the market beta of the equity.

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Definitions:

Total Return

The complete return on an investment over a given time period, including both capital gains and dividends or interest, expressed as a percentage of the initial investment cost.

Dividends

Payments made by a corporation to its shareholder members as a distribution of profits.

Canadian Treasury Bills

Short-term government securities issued by the Government of Canada, maturing in one year or less, and used as a means for the government to raise funds.

Increased Value

The rise in the worth or market price of an asset.