Does ‘debt Financed’ refer to d/e or d/tc ratio?
Ans is opt a. The D/TC ratio is 20% and the D/E ratio is 25%.
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Debt financed refers to D/TC
MV of debt here is 100 mn
MV of Eqty. is 300 mn
Debt financed = 100/400 = 25% with debt and 75% with eqty.
Hope you get it.