FIN 419 ASSIST Perfect Education/fin419assist.cofi FIN 419 ASSIST Perfect Education/fin419assist.cofi | Seite 7

13) Degree of financial leverage North western Savings and Loan
has a current capital structure consisting of $230,000 of 15%
(annual interest) debt and 1,000 shares of common stock. The firm
pays taxes at the rate of 30%.
14) Various Capital Structures Character Enterprises currently has
$1.5 million in total assets and is totally equity financed. It is
contemplating a change in its capital structure. Compute the
amount of debt and equity that would be outstanding is the firm
were to shift to each of the following debt ratios: 10%, 20%, 30%,
40%, 50%, 60%, and 90%.
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FIN 419 Final Exam Guide
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True/False (1point each)
1. The sole proprietor has unlimited liability; his or her total
investment in the business, but not his or her personal assets, can be
taken to satisfy creditors.
2. Time-value of money is based on the belief that a dollar that will
be received at some future date is worth more than a dollar today.