Please solve this problem is accounting If a firm has $100,000 debt and $100,000 equity, thena. The return on equity ratio is 1.b. The debt-to-equity ratio is 1.c. The return on assets ratio is 0.5.d. The firm has too much debt.

Step 1: Definition of Debt-to-Equity RatioThe Debt-to-Equity (D/E) Ratio measures a firm's financial…

Answered: If a firm has $100,000 debt and…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

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A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections? A. 10% B. 15% C. 18% D. 21% E. None of these.
A firm has a return on assets of 7.8 percent and a cost of equity of 11.9 percent. What is the pretax cost of debt if the debt–equity ratio is .72? Ignore taxes.
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A firm had a debt ratio of 1.20. The pretax cost of debt is 8% and the reqiured return on asset is 13%. What is the cost of equity if you Ignore taxes? A) 18.24% B) 20.14% C)17.67% D) 19.57% E) 19%
Suppose PayPal (PYPL) has no debt and an equity cost of capital of 9.7 %. The average debt-to- value ratio for the credit services industry is 15.4 %. What would its cost of equity be if it took on the average amount of debt for its industry at the cost of debt of 6%?
Which one of the following statements is correct? Multiple Choice If the total debt ratio is greater than .50, then the debt-equity ratio must be less than 1.0. Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5. The debt-equity ratio can be computed as 1 plus the equity multiplier. An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity. An increase in the depreciation expense will not affect the cash coverage ratio. 1
Company X has a profit margin of 0.08, asset turnover of 1.3, and equity multiplier of 4.0. Which of the following needs to happen for their ROE to be equal to their ROA. O Sales have to increase O Profit margins have to increase O Their equity multiplier has to increase O They have to repay all of their debt and not borrow more
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3. ABC Corp.’s equity multiplier is 1.25. What is its debt ratio? 4.Easy Corp.’s return on assets measure is 0.20 (20%. Its return on equity measure is 0.25 (25%). What is the firm’s equity multiplier?
What is this firm debt equity ratio?
What is its cost of equity if there are no taxes or other imperfections? The firm has a debt-to-equity ratio of 0.60. Its cost of debt is 8%. Its overall cost of capital is 12%. A) 18% B) 14.4% C) 10%. D) 13.5%

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If a firm has $100,000 debt and $100,000 equity, then a. The return on equity ratio is 1. b. The debt-to-equity ratio is 1. c. The return on assets ratio is 0.5. d. The firm has too much debt.