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maw [93]
3 years ago
11

If MM's proposition II without taxes is true, what is the return to investors who invest $20 in a stock, borrow another $20 to b

uy a share of stock and pay 6% on the borrowed money if the EPS is $1.50?
a. 6.0%.
b. 9.0%.
c. 12.0%.
d. 15.0%.
Business
1 answer:
PilotLPTM [1.2K]3 years ago
7 0

Answer:

b. 9.0%.

Explanation:

The computation of the return on the investment is shown below:

Net earning is

= Earning per share × number of shares  - interest paid

= (1.50 × 2) - ($20 × 6%)

= $1.80

Now  the return on the investment is

= Net earning ÷ own investment

= $1.80 ÷ $20 × 100

= 9%

Hence, the return on the investment is 9%

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3 0
3 years ago
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