Quiz Ch 04 – T/F Impact of Debt Ratio on ROE

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: Considering Firms A and B with equal assets, total invested capital, debt interest rate, BEP, financing through debt and equity, and tax rate, but differing debt to capital ratios, if BEP surpasses the debt interest rate, Firm A will yield a higher ROE due to its increased debt ratio.

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