Cost of Capital. An analyst at Dawn Chemical notes that its cost of debt is far below
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Cost of Capital. An analyst at Dawn Chemical notes that its cost of debt is far below that of equity. He concludes that it is important for the firm to maintain the ability to increase its borrowing because if it cannot borrow, it will be forced to use more expensive equity to finance some projects. This might lead it to reject some projects that would have seemed attractive if evaluated at the lower cost of debt. Comment on this reasoning.
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Study Guide To Accompany Fundamentals Of Corporate Finance
ISBN: 9780073012421
5th Edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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