Question
Alpha Inc. has twice as much debt at Beta Ltd. Beta Ltd. has the same amount of equity but a third of the debt of
Alpha Inc. has twice as much debt at Beta Ltd. Beta Ltd. has the same amount of equity but a third of the debt of Theta Corporation that has $400,000 in debt and a debt/equity ratio of 2. If the cost of debt for Alpha Inc. is 7% per annum, how much is Alpha Inc.s annual debt interest and what is Beta Ltd.s debt/equity ratio?
a.
Annual Debt Interest = $9,333; and debt/equity ratio = 3
b.
Annual Debt Interest = $18,667; and debt/equity ratio = 3
c.
Annual Debt Interest = $18,667; and debt/equity ratio = 0.67
d.
Annual Debt Interest = $28,000; and debt/equity ratio = 2
e.
Annual Debt Interest = $9,333; and debt/equity ratio = 0.67
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Experiences With Financial Liberalization
Authors: K. L. Gupta
1st Edition
079239853X, 978-0792398530
