Tom owns 22 hotdog stands. Tom earned $10,000 last year from the hotdog stands business. For $4000, Tom...
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Tom owns 22 hotdog stands.
Tom earned $10,000 last year from the hotdog standsbusiness.
For $4000, Tom can build two more stands, each stand costs$2000. Assume it costed Tom $2000 to build each of 22 stands.
If Tom has 24 stands instead of 22, its yearly income will risefrom $10,000 to $11,000. Let’s assume Tom indeed added two morestands using the money he earned last year.
David
Everything is the same except for David borrows $4000 at 6%interest rate to finance two more stands. What would be ROE forDavid's plan?
24.4%
14.8%
18.3%
12.2%
Tom owns 22 hotdog stands.
Tom earned $10,000 last year from the hotdog standsbusiness.
For $4000, Tom can build two more stands, each stand costs$2000. Assume it costed Tom $2000 to build each of 22 stands.
If Tom has 24 stands instead of 22, its yearly income will risefrom $10,000 to $11,000. Let’s assume Tom indeed added two morestands using the money he earned last year.
David
Everything is the same except for David borrows $4000 at 6%interest rate to finance two more stands. What would be ROE forDavid's plan?
24.4%
14.8%
18.3%
12.2%
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