Question

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

Options

• RoI (13.33%) > Cost of Debt (10%)

• RoI (6.67%) < Cost of Debt (10%)

• RoI (6.67%) > Cost of Debt (30%)

• RoI (10%) < Cost of Debt (6.67%)

Answer 1

Company Y Ltd.'s RoI of 6.67% is less than its Cost of Debt of 10%. The company earns less on borrowed funds than it pays as interest.