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Which of the following is an effect of managers increasing the amount of debt used in...

Which of the following is an effect of managers increasing the amount of debt used in the firm's funding mix?

Multiple Choice

  • the rate of return on common equity increases

  • a. and c.

  • the chance of financial distress or bankruptcy increases

  • the expected rate of return on assets increases

  • the number of shareholders increases

Solutions

Expert Solution

a. and c.

the rate of return on common equity increases

the chance of financial distress or bankruptcy increases

Due to increase in debt, chances of bankruptcy increases and shareholders also demand higher return due to more risk

jeff jeffy answered 2 years ago
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