Garwryk, Inc., which is financed with debt and equity, presently has a debt ratio of

84

percent. What is the firm's equity multiplier? How is the equity multiplier related to the firm's use of debt financing (i.e., if the firm increased its use of debt financing would this increase or decrease its equity multiplier)? Explain.

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Part 1

What is the firm's equity multiplier?

The equity multiplier is given by:

Equity Multiplier=11Debt Ratio

The equity multiplier is 1/1-Debt Ratio

enter your response here.

(Round to two decimal places.)