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Suppose That Pop's Cycles,Inc

Question 62

Multiple Choice

Suppose that Pop's Cycles,Inc.has a ROA of 7% and pays a 6% coupon on its debt.Pop's has a capital structure that is 70% equity and 30% debt.Relative to a firm that is 100% equity-financed,Pop's Net Profit will be ________ and its ROE will be _______.


A) lower,lower
B) lower,higher
C) higher,lower
D) higher,higher
E) It is impossible to predict.

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