Assume a Firm Is Financed with 60% Debt on Which

question 25

Multiple Choice

Assume a firm is financed with 60% debt on which it pays 7%. What is the expected return on equity if the expected return on assets is 12%?

• A) 16.14%
• B) 20.30%
• C) 19.50%
• D)21.67%

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Definitions:

Environment

The surrounding conditions, influences, and natural world in which a person, plant, or animal lives and operates.

Experiences

Events or occurrences that leave an impression on someone, contributing to their knowledge, opinions, or emotions.

Psychoanalysis

A therapeutic approach and theory of psychology developed by Sigmund Freud, focusing on unconscious motivations and conflicts as drivers of human behavior.

Sigmund Freud

An Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.