As a Firm's Debt-Equity Ratio Approaches Zero,the Firm's Expected Return

question 80

Multiple Choice

As a firm's debt-equity ratio approaches zero,the firm's expected return on equity approaches:

• A) the expected return on debt.
• B) the expected return on assets.
• C) its maximum.
• D) zero.

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Definitions:

Transferred Property

Property or assets that have been legally moved from one owner to another, through sale, gift, inheritance, or other means of conveyance.

Discharge

The termination of an obligation. In bankruptcy, a discharge terminates the debtor's obligation to pay the debts discharged by the court.

Termination

The act of ending something, such as a contract, employment, or agreement.

Debtor's Obligation

The responsibility or duty of a debtor to pay back a debt or fulfill a contractual commitment.