Question

How does Company X Ltd.'s RoI compare with its Cost of Debt?

Options

• RoI (13.33%) > Cost of Debt (10%)

• RoI (13.33%) < Cost of Debt (30%)

• RoI (10%) > Cost of Debt (13.33%)

• RoI (6.67%) < Cost of Debt (10%)

Answer 1

Company X Ltd.'s RoI of 13.33% exceeds its Cost of Debt of 10%. The company earns more on borrowed funds than it pays as interest.