Question $4(1$ point$)$

Which of the following is true regarding the relationship between business risk and

capital structure?

Lower variability$/$uncertainty in EBIT encourages the use of less debt in an

organization's capital structure

An increased level of operating leverage encourages the use of more debt in an

organization's capital structure

A decreased level of operating leverage encourages the use of more debt in an

organization's capital structure

Greater variability$/$uncertainty in EBIT encourages the use of more debt in an

organization's capital structure

Question $5(1$ point$)$

Assume that the risk$-$free rate is $8$ percent, the required rate of return on the market

$($for an average$-$risk stock$)$ is $13$ percent, and the required rate of return on Acme

Healthcare stock is $15$ percent. What is the implied beta coefficient of the stock?

$1\mathrm{.}4$

$1\mathrm{.}5$

$1\mathrm{.}2$

$1\mathrm{.}0$