Note the two blank graphs in Figure 17.5 below. On graph ( a ), assume MM are
Question:
Note the two blank graphs in Figure 17.5 below. On graph ( a ), assume MM are right, and plot the relationship between financial leverage (debt-equity ratio) and (i) the rates of return on debt and equity and (ii) the weighted-average cost of capital. Then fill in graph
( b ), assuming the traditionalists are right.
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