A firm is currently financed with $2 million in debt and $6 million in equity. What will happen to its debt-equity ratio if it simultaneously issues another $2 million in debt and $2 million in
Equity?
A)The debt-equity ratio would increase from 33 1/3% to 100%.
B)The debt-equity ratio would increase from 25% to 33 1/3%.
C)The debt-equity ratio would be unchanged.
D)The debt-equity ratio would increase from 33 1/3% to 50%.

Question

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The Answer of A firm is currently financed with $2 million in debt and $6 million in equity. What will happen to its debt-equity ratio if it simultaneously issues another $2 million in debt and $2 million in
Equity?
A)The debt-equity ratio would increase from 33 1/3% to 100%.
B)The debt-equity ratio would increase from 25% to 33 1/3%.
C)The debt-equity ratio would be unchanged.
D)The debt-equity ratio would increase from 33 1/3% to 50%.

A Firm Is Currently Financed with $2 Million in Debt