Multiple Choice
Suppose that Chicken Express, Inc. has an ROA of 7% and pays a 6% coupon on its debt. Chicken Express has a capital structure that is 70% equity and 30% debt. Relative to a firm that is 100% equity-financed, Chicken Express's net profit will be ________, and its ROE will be ________.
A) lower; lower
B) higher; higher
C) higher; lower
D) lower; higher
E) It is impossible to predict.
Correct Answer:
Verified
Correct Answer:
Verified
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