Question
22. XCV Inc., which manufactures automobile parts for assembly, is considering the costs and the benefits of leverage. The CFO notes that the return on
22. XCV Inc., which manufactures automobile parts for assembly, is considering the costs and the benefits of leverage. The CFO notes that the return on equity of the firm, which is only 12.75% now based on the current policy of no leverage, could be increased substantially by borrowing money. Is this true? Does it follow that the value of the firm will increase with leverage? Why or why not?
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International Financial Reporting Standards An Introduction
Authors: Belverd E. Needles, Marian Powers
3rd Edition
1133187943, 978-1133187943
