Question: Alpha Inc. has twice as much debt at Beta Ltd. Beta Ltd. has the same amount of equity but a third of the debt of

Alpha Inc. has twice as much debt at Beta Ltd. Beta Ltd. has the same amount of equity but a third of the debt of Theta Corporation that has $400,000 in debt and a debt/equity ratio of 2. If the cost of debt for Alpha Inc. is 7% per annum, how much is Alpha Inc.s annual debt interest and what is Beta Ltd.s debt/equity ratio?

a.

Annual Debt Interest = $9,333; and debt/equity ratio = 3

b.

Annual Debt Interest = $18,667; and debt/equity ratio = 3

c.

Annual Debt Interest = $18,667; and debt/equity ratio = 0.67

d.

Annual Debt Interest = $28,000; and debt/equity ratio = 2

e.

Annual Debt Interest = $9,333; and debt/equity ratio = 0.67

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