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:

Nuclear Medicine

A medical specialty that uses small amounts of radioactive material to diagnose and treat a variety of diseases.

Structural Appearance

How the physical structure or arrangement of something looks or is perceived visually.

Bone Scan

A nuclear imaging test that helps to diagnose and track several types of bone disease by detecting areas of high bone metabolism.

Prosthesis

An artificial replacement of a missing body part.