Question: Question One a) Financial leverage increases shareholders' retum on the one hand but also increases their risk on the other hand. Explain this statement using

Question One a) "Financial leverage increases shareholders' retum on the one

Question One a) "Financial leverage increases shareholders' retum on the one hand but also increases their risk on the other hand". Explain this statement using appropriate illustrations (5 marks) b) Explain the concept of optimal capital structure (5 marks) c) How long will it take to double your money if it grows at 2% per annum? Show your workings (5 marks) d) Explain how managerial compensation can be used to align managerial and shareholder interests

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