What affect does debt have on shareholder returns

What affect does debt have on shareholder returns - $1000...

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What affect does debt have on shareholder returns? Example: Imagine two firms, one that uses debt and one that finances its fixed asset purchases with equity. Firm #1 Firm #2 Total assets
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Unformatted text preview: $1000 $1000 Debt (10%) 500 Equity 1000 500 Total debt & equity $1000 $1000 Operating income $200 $200 Interest exp. 50 Net income $200 $150 ROE 20% 30%...
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This note was uploaded on 08/22/2009 for the course FIN 3310 taught by Professor Potts during the Spring '08 term at Baylor.

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