A Firm Is Currently Financed with $2 Million in Debt

question 27

Multiple Choice

A firm is currently financed with $2 million in debt and $6 million in equity. What will happen to its debt-equity ratio if it simultaneously issues another $2 million in debt and $2 million in
Equity?

• A)The debt-equity ratio would increase from 33 1/3% to 100%.
• B)The debt-equity ratio would increase from 25% to 33 1/3%.
• C)The debt-equity ratio would be unchanged.
• D)The debt-equity ratio would increase from 33 1/3% to 50%.

---

Definitions:

Prevent Contamination

Measures or practices designed to stop the introduction of harmful substances into products, environments, or natural resources, ensuring safety and purity.

Monitoring Wells

Wells drilled at specific locations to collect samples and measure groundwater levels, quality, or other environmental data.

Coastal Waters

are parts of the ocean that are close to the shoreline or land, including estuaries, bays, and seas, and are often significantly influenced by the terrestrial environment.

Toxic Pollutants

Substances that can cause harm to the environment and living organisms, including humans, due to their toxic properties.