# FIN 370 Chapter 20 Basic Finance Leverage Problem 1

FIN 370 Chapter 20 Basic Finance Leverage Problem 1

20 Basic Finance: Leverage / Problem 1

- A) Firm A has $10,000 in assets entirely financed with equity.
- B) Firm B also has $10,000 in assets, but these are financed by $5,000 in debt

(with a 10 % rate of interest) and $5,000 in equity.

- C) Both firms sell 10,000 units of output at $2.50 per unit.
- D) The variable costs of production are $1.00, and fixed production costs are

12,000. (To ease the calculation, assume no income tax.)

FIN 370 Chapter 20 Basic Finance Leverage Problem 1_Solution ( Solved by CPA)

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