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NEW QUESTION: 1

A. Option A
B. Option D
C. Option C
D. Option B
Answer: B

NEW QUESTION: 2
Section C (4 Mark)
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 return on assets, Company B will have a higher return on equity.
B. If the two companies have the same level of sales and basic earning power (BEP), Company B will have a lower profit margin.
C. If the two companies have the same basic earning power (BEP), Company B will have a higher return on assets.
D. All of the answers above are correct.
Answer: C

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