The equity holders of Super Nova, Inc. have 100 million of equity in the firm. Because...
The equity holders of Super Nova, Inc. have 100 million of equity in the firm. Because of debt, the total value of the assets is 600 million. What is the leverage factor in this business?
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1 |
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5 |
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6 |
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7 |
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Greater than 10, but less than 16 |
Homework Answers
Leverage factor = total debt/total equity
Debt = total assets - equity
= 600 million - 100 million
= $500 million
Hence, leverage factor = 500 million/100 million
= 5
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