Return on Equity Increases When the Expected Rate of Return

question 227

True/False

Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

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Definitions:

Income Taxes

Income taxes are taxes levied by governments on individuals and corporations based on their net income or profit within a financial year.

After-Tax Discount Rate

A rate that adjusts for taxes when evaluating the present value of future cash flows.

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income, varying based on income levels and jurisdictions.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in a linear fashion.