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Suppose Firms A and B have the same amount of assets, pay the same interest rate on their debt, have the same basic earning power
Suppose Firms A and B have the same amount of assets, pay the same interest rate on their debt, have the same basic earning power (BEP), and have the same tax rate. However, Firm A has a higher debt ratio. If BEP is greater than the interest rate on debt, Firm A will have a higher ROE as a result of its higher debt ratio.
Is it true? Explain in detail.
Is it true? Explain in detail.
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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
9th Edition
1337614689, 1337614688, 9781337668262, 978-1337614689
