If a firm has twice as much equity as debt in its capital structure,then the firm is financed with:

Question

Quizplus · Accepted Answer

If the firm has twice as much equity as debt, then we can calculate the proportions of equity and debt in the capital structure using the following formula:

Equity Proportion = Equity / (Equity + Debt)

Debt Proportion = Debt / (Equity + Debt)

Let's assume that the firm has a total of $100 in capital. If the firm has twice as much equity as debt, then the equity amount is $66.67 and the debt amount is $33.33. Therefore, the equity proportion is 66.67% and the debt proportion is 33.33%.

So, the answer is B, which represents 66.7% equity.

If a Firm Has Twice as Much Equity as Debt