16.2 a. Every change of $50,000 in operating income leads to a change in the return to...
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16.2
a. Every change of $50,000 in operating income leads to a change in the return to equityhold- ers of 20%. This is double the swing in equity returns when debt was only $500,000.
b. The stockholder should lend out $3 for every $1 invested in River Cruises's stock. For example, he could buy one share for $10 and then lend $30. The payoffs are:
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Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus
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