A Firm That Is Worth $2 Million and Is Financed

question 22

Multiple Choice

A firm that is worth $2 million and is financed with 40% risk-free debt and 60% equity grows in value to $3 million. What is its new debt-equity ratio?

• A)76.5%
• B)63.2%
• C)36.4%
• D)26.7%

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Definitions:

Photoreceptor

Sensory receptor that responds to light stimuli.

Proprioceptor

Class of mechanoreceptor responsible for maintaining the body’s equilibrium and posture; involved in reflex actions.

Organ of Corti

The sensory organ located within the cochlea of the inner ear, responsible for converting sound vibrations into nerve impulses.

Retina

A layer at the back of the eyeball containing cells sensitive to light, which trigger nerve impulses that pass via the optic nerve to the brain.