Addition of debt to capital structure, Finance Basics

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Addition of debt to capital structure

Hugh Brokett's Insurance provides the following data (EBIT is earnings Before Interest and Taxes)

EBIT = $32,000
Tax Rate = 250%
Assets = $240,000

A. It's assets are currently 100% equit financed (no debt). What is Hugh Brokett's current ROE?

B. If they replace 60% of the equity with debt financing at an interest rate of 12%, what is their ROE?

C. What advice would you give Hugh Brokett regarding the addition of debt to their capital structure?

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Finance Basics: Addition of debt to capital structure

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Finance Basics: Addition of debt to capital structure

Reference No:- TGS038537

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Recent Questions Asked Finance Basics

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Finance Basics: Addition of debt to capital structure

Reference No:- TGS038537

Recent Questions Asked Finance Basics

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