.Question: Homemade Leverage

TLC Co. has no debt and shares trading at $5 each. Instead of an all equity investment, homemade leverage can create a capital structure of 75% equity and 25% debt when purchasing one company share.

1)This is done by.?

a)lending $4

b)lending $1

c)borrowing $1.25

d)borrowing $4

2)combining that with..and using the total capital to purchase a single share?

a)$1 equity

b)$2 equity

c)$3 equity

d)$3.75 equity

Question: Homemade Leverage II

RBA Co. has D/E ratio of 2 and shares trading at $30 each. Homemade leverage can be used to eliminate the exposure to debt to create an all equity investment when buying one company share

3)This is done by.. from the company?

a)lending $30

b)lending $60

c)borrowing $30

d)borrowing $60

4)using.to purchase a single share?

a)$10 equity

b)$20 equity

c)$30 equity

d)$40 equity

Question: Homemade Leverage III

BAR Co. has D/E ratio of 2 and shares trading at $30 each. Rather than accept the firms capital structure, an investor can use homemade leverage to create an 1/3 debt and 2/3 equity investment when buying one company share.

5)This is done byfrom the company?

a)lending $45

b)lending $60

c)borrowing $30

d)borrowing $60

6)using..to purchase a single share?

a)$10 equity

b)$20 equity

c)$30 equity

d)$40 equity