Suppose "South End, Inc

Subject:FinancePrice:2.86 Bought9

Share With

Suppose "South End, Inc. has a ROA of 7% and pays a 6% interest on its debt. South End has a capital structure that is 70% equity and 30% debt. Relative to a firm that has similar earnings and is 100% equity financed, South End’s Net Profit will be _____ and its ROE will be _______. Choose the best possible answer considering a general scenario *

1. Higher, higher

2. Lower, lower

3. Difficult to correctly predict with given information

4. Lower, higher

5. Higher, lower