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BuyUS Incplans to Issue 7%,$400,000,10-Year Bonds in Order to Finance an an Expansion.The

Question 125

Multiple Choice

BuyUS Inc.plans to issue 7%,$400,000,10-year bonds in order to finance an expansion.The expansion is expected to increase income before interest expense from $100,000 to $175,000.BuyUS has $1,000,000 in average common equity.Calculate the expected return on common shareholders' equity.(ignore income taxes)


A) 7.0%
B) 14.7%
C) 20.0%
D) 43.8%
E) 57.1%

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