Smile Industries capital structure consists of $1,000,000 of debt at 6 percent interest and 1,500,000 of stockholders equity at 2 percent. The proportion of Equity in the total capital structure is

Question

Quizplus · Accepted Answer

To find the proportion of equity, we need to divide the total equity by the sum of equity and debt. 
Total Capital Structure = Debt + Equity = $1,000,000 + $1,500,000 = $2,500,000
Proportion of Equity = Equity / Total Capital Structure = $1,500,000 / $2,500,000 = 0.6 or 60%. 
Therefore, the correct choice is B.

Smile Industries Capital Structure Consists of $1,000,000 of Debt at 6