If a Firm Has Three Times as Much Equity as Debt

question 42

Multiple Choice

If a firm has three times as much equity as debt in its capital structure,then the firm has:

• A) 25.0% debt.
• B) 66.7% equity.
• C) 40.0% debt.
• D) 33.3% equity.

---

Definitions:

Net Investment

The total amount spent on capital assets (like plant and equipment) minus depreciation, reflecting the actual increase in an entity's productive capacity.

Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting the decrease in value of assets due to use, wear and tear, or obsolescence.

Implicit Cost

An indirect, non-payment expense represented by the opportunity cost of utilizing resources in a specific project instead of elsewhere.

Expected Profit Rate

The forecasted return on investment over a specific period, reflecting the potential profitability of a business endeavor.