What happens to a firm when it raises its debt from 0 to 10, Financial Management

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What happens to a firm when it raises its debt from 0 to 10

1. What happens to a firm when it raises its debt from 0% to 10%. Does the ROE go up or the basic earning power?

2. Does operating leverage influence financing leverage?

3. Food Shoppe Galore had the following information:

Total market value of a company’s stock: $650 million

Total market value of the company’s debt: $150 million

What is the weighted average of the company’s debt?

18.75%

40.75%

55.75%

81.25%

90.50%

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Financial Management: What happens to a firm when it raises its debt from 0 to 10

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