Business, 03.02.2020 23:45, Issaking0131

Company a is financed with 90 percent debt, whereas company b, which has the same amount of total assets, is financed entirely with equity. both companies have a marginal tax rate of 35 percent. which of the following statements is most correct?

a. if the two companies have the same basic earning power (bep), company b will have a higher return on assets.
b. if the two companies have the same return on assets, company b will have a higher return on equity.
c. if the two companies have the same level of sales and basic earning power (bep), company b will have a lower profit margin.
d. all of the answers above are correct.
e. none of the answers above is correcta.

Answers: 3

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Company a is financed with 90 percent debt, whereas company b, which has the same amount of total as...