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Introduction to Finance
Feedback — Assignment 9
You have submitted this Assignment on Wed 26 Sep 2012 8:58:18 PM EEST. You achieved a score of 90.00 out of 100.00. Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including $, %, commas, etc.). Enter all dollars without decimals and all interest rates in percentage with up to two decimals. Read the syllabus for examples.The points for each question are listed in parentheses at the start of the question, and the total points for the entire assignment adds up to 100.
Question 1
(5 points) In a world with no frictions (i.e., taxes, etc.), having debt is always better because it increases the value of the firm/project. Your Answer Score Explanation Correct 5.00 Correct. You understand the irrelevance of financing. False. Total 5.00 / 5.00 Question Explanation Fundamental question about value creation.
Question 2
(5) The return of equity is equal to the return on debt of a project/firm Your Answer Score Explanation Correct. Equity is always riskier. Never true. Correct 5.00 Total 5.00 / 5.00 Question Explanation Financing's effects on equity.
Question 3
(10 points) Moogle, Inc. is in the same business as Google, Inc., but has recently retired all its debt to become an all-equity firm. Its return on equity has dropped from 12.25% to 10.60% as a result of this. Google, Inc. continues to have debt in its capital structure, and its debt-to-equity ratio is 30%. What is the return on assets of Google, Inc.(No more than two decimals in the percentage interest rate, but do not