If the firm borrows capital from a bank and invests it in assets that earn a return

Question:

If the firm borrows capital from a bank and invests it in assets that earn a return greater than the interest rate charged by the bank, what effect will that have on residual income for the firm? How does that effect compare with the effects of leverage described in Chapters 4 and 5?

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...