What Proportion of the Firm Is Financed by Debt for a Firm

question 38

Multiple Choice

What proportion of the firm is financed by debt for a firm that expects a 15% return on equity, a 12% return on assets, and a 10% return on debt? The tax rate is 25%.

• A)20%
• B)1/3
• C)60%
• D)2/3
• E)80%

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Definitions:

Distribution Network

The interconnected group of storage facilities and transportation systems that a company uses to get products from the manufacturer to the end consumer.

Raw Material

Basic materials that are processed or transformed into components or products in manufacturing and production processes.

Manufacturing Plants

Facilities where goods are produced in large quantities through combining and processing raw materials using various machines and labor.

Supply

The total amount of a product or service available for purchase or consumption by consumers in a market.