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  3. 1. a) if a firm has $25 million of debt and $75 mi

1. a) If a firm has $25 million of debt and $75 million of equity,...

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Finance

1. a) If a firm has $25 million of debt and $75 million of equity, what fraction of the firms value was financed with debt?

b) Corporate control is a factor that the firms decision makers use but it doesnt necessarily work out well for firm value. Acme Inc., was founded by the Acme family and its members own the majority of its stock. Not wishing to lose control of the company, Acme has done all new borrowing with debt and it now has the highest Debt/Equity in its industry. How might this hurt the value of Acme Inc. eventually?

c) If a firm changes its capital structure by decreasing its ratio of debt to equity, does it increase or decrease the percent of the company finance with equity?

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