What is the proportion of debt financing for a firm that expects a 24% return on equity,a 16% return on assets,and a 12% return on debt? Ignore taxes.
A) 54.0%
B) 60.0%
C) 66.7%
D) 75.0%

Name: What is the proportion of debt financing for a firm that expects a 24% return on equity,a 16% return on assets,and a 12% return on debt? Ignore taxes. A) 54.0% B) 60.0% C) 66.7% D) 75.0%
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Quizplus · Accepted Answer

0.24 = 0.16 + D / E(0.16 − 0.12); D / E = 2Debt financing % = 2 / (2 + 1) = 0.667, or 66.7%

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