You Are Considering a Stock Investment in One of Two

question 81

Multiple Choice

You are considering a stock investment in one of two firms (A and B) , both of which operate in the same industry. A finances its $20 million in assets with $18 million in debt and $2 million in equity. B finances its $20 million in assets with $2 million in debt and $18 million in equity. Calculate the debt-to-equity ratio for the two firms.

• A) Firm A: 9 times; Firm B: 1.11 times
• B) Firm A: 19 times; Firm B: .11 times
• C) Firm A: 9 times; Firm B: .11 times
• D) Firm A: 19 times; Firm B: 1.11 times

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Definitions:

Void

A legal term indicating that a contract or transaction is null, holding no legal effect.

Unilateral Mistake

A legal concept in contract law where one party is mistaken about a basic assumption on which a contract is based, without the other party sharing the same mistake.

Vehicle Taxes

Taxes imposed on vehicles by various jurisdictions, often based on the vehicle's value, weight, or usage.

Recover

The process of obtaining something lost or owed, such as regaining health or retrieving financial compensation through legal means.