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Answer the following questions as true or false a. If two different businesses have the same...

Answer the following questions as true or false

a. If two different businesses have the same Tax Rates and Return on Assets, can the first business have a larger Return on Equity if it borrows money at a lesser interest rate?

b. Asset turnover and return on sales do not depend on leverage.

c. Current market price is the futures price

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Answer #1

A. Yes, the given statement is TRUE,if the cost of debt would be lesser due to lower interest rate than it would also mean that the return on asset and return on equity will be higher.

B. The given statement is FALSE because asset turnover and return on sales will be depending upon leverage because leverage will be increasing the total sales of a company .

C. Given a statement is FALSE because future prices is not the current market price. it is after providing a premium and discount to the current market price and ascertainment of risk in the future

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