David Is Trying to Decide Whether to Add Capital Through

Multiple Choice

David is trying to decide whether to add capital through investing more of his own money or through borrowing money from the bank.To help him decide, you remind him that as long as his business's rate of return on its assets is greater than the cost of the debt, his rate of return on equity will _____ as the business uses more debt.

A) decrease
B) increase
C) remain the same
D) fluctuate