Homework Answers
The Correct Answer is 11.
When 25% of Loan went to bank default. So, Loan will be reduced by
= $800 * 25%
= $200
The New Loan amount will be $600.
The Amount $200 will be write off from owner's equity. That will reduce the owner equity by $200.
So, the new owner's equity will be $100.
Leverage Formulae = Total Debt / Total Equity
Now, The Total Debt will be( $900 + $200)
= $1100
Total Equity = $ 100
So, Leverage Formulae = $1100/$100
Leverage = 11
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