A Firm Increases Its Financial Leverage When Its ROA Is

question 37

Multiple Choice

A firm increases its financial leverage when its ROA is greater than the cost of debt. Everything else equal this change will probably increase the firm's ________.
I. beta
II. earnings variability over the business cycle
III. ROE
IV. share price

• A)I and II only
• B)III and IV only
• C)I, III and IV only
• D)I, II and III only

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