What Is the Proportion of Debt Financing for a Firm

question 16

Multiple Choice

What is the proportion of debt financing for a firm that expects a 24% return on equity,a 16% return on assets,and a 12% return on debt? Ignore taxes.

• A) 54.0%
• B) 60.0%
• C) 66.7%
• D) 75.0%

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Definitions:

Net Income

What a business earns in profit once every cost and tax is deducted from its revenue.

Bonus Plan Expense

Costs associated with incentive-based compensation programs designed to reward employees for their performance.

Gross Earnings

Gross earnings refer to the total income earned by an individual or company before any deductions such as taxes or other withholdings.

Taxes Applied

The implementation of tax rates to various forms of income, activities, or transactions.