If the debt ratio is 50 percent, the interest rate on all debt is 8 percent, the tax rate is 50 percent, and the return on equity is 10 percent, then the ratio of earnings before interest and taxes (EBIT) to total assets, or the basic earning power ratio, must be
A)10%.
B)14%.
C)12%.
D)8%.
E)16%.

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The Answer of If the debt ratio is 50 percent, the interest rate on all debt is 8 percent, the tax rate is 50 percent, and the return on equity is 10 percent, then the ratio of earnings before interest and taxes (EBIT) to total assets, or the basic earning power ratio, must be
A)10%.
B)14%.
C)12%.
D)8%.
E)16%.

If the Debt Ratio Is 50 Percent, the Interest Rate