Lightyear Technology Corporation finances its operations with $75 million in stock with a required return of 12 percent and $45 million in bonds with a required return of 8 percent.Suppose the firm issues $15 million in additional bonds at 8 percent,using the proceeds to retire $15 million worth of equity.What will be the firm's new debt to equity ratio? (Assume zero taxes and perfect capital markets)
A) 0.75
B) 0.90
C) 1.00
D) 1.10
Correct Answer:
Verified
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