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johnpaech johnpaech
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6 years ago
Alpha Beta Corporation maintains a constant debt-equity ratio of 0.5.  The total value of the firm is $30 million, and existing debt is riskless.  Over the next three months, news will come out that will either raise or lower Alpha Beta's value by 10%.  How will Alpha Beta adjust its debt level in response to keep its debt-equity ratio constant?
A) Either increase by $1 million or decrease by $1 million.
B) Either increase by $1.5 million or decrease by $1.5 million.
C) Either increase by $3 million or decrease by $3 million.
D) There will be no change - the debt-equity ratio will remain constant.
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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pbrown223pbrown223
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johnpaech Author
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5 years ago
Really appreciate the help
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