Question 1 A firm\'s EM (equity multiplier) will increase if they issue new comm

Question

Question 1

A firm's EM (equity multiplier) will increase if they

issue new common stock and use the money to repurchase their own bonds

issue new bonds and use the money to repurchase shares of their own common stock

Question 2

A firm's EM will equal 1 iff (if and only if) there are no liabilities on their balance sheet.

True

False

Question 3

A firm with a debt ratio of 50% will have an EM of

1.00

1.25

1.50

2.00

5.00

Question 4

A firm with a debt ratio of 80% will have an EM of

1.00

1.25

1.50

2.00

5.00

Question 5

ABC Corporation has: nPM=5%, TATO=3.00x, DR=20%. Their ROA is

5%

7.50%

10%

15%

18.75%

issue new common stock and use the money to repurchase their own bonds

issue new bonds and use the money to repurchase shares of their own common stock

Question 2

A firm's EM will equal 1 iff (if and only if) there are no liabilities on their balance sheet.

True

False

Question 3

A firm with a debt ratio of 50% will have an EM of

1.00

1.25

1.50

2.00

5.00

Question 4

A firm with a debt ratio of 80% will have an EM of

1.00

1.25

1.50

2.00

5.00

Question 5

ABC Corporation has: nPM=5%, TATO=3.00x, DR=20%. Their ROA is

5%

7.50%

10%

15%

18.75%

Explanation / Answer

1. issue new bonds and use the money to repurchase shares of their own common stock

2. true

3.2.00

4. 5.00

5. 15%

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