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

79

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= 1/1- debt ratio

The equity multiplier is

enter your response here.

(Round to two decimal places.)