2. Fill in the table using the following information. Assets required for operation: $2,000 Case Afirm uses only equity financing Case Bfirm uses

2. Fill in the table using the following information. Assets required for operation: $2,000 Case Afirm uses only equity financing Case Bfirm uses

2. Fill in the table using the following information.Assets required for operation: $2,000Case Afirm uses only equity financingCase Bfirm uses 30% debt with a 10% interest rate and 70% equityCase Cfirm uses 50% debt with a 12% interest rate and 50% equityA B CA B CDebt outstanding $ $ $Stockholders equityEarnings before interest and taxes 300 300 300Interest expenseEarnings before taxesTaxes (40% of earnings)Net earningsReturn on stockholders equity % % %What happens to the rate of return on the stockholders investment asthe amount of debt increases? Why did the rate of interest increase incase C?


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