Suppose that the CFO of NETINC Ltd decides to increase the companys debt financing from one-half to
Question:
Suppose that the CFO of NETINC Ltd decides to increase the company’s debt financing from one-half to three-quarters of its total financing. Based on the data in Problem 1, what would be the effect of this change in capital structure on the company’s cost of equity? Assume now that the net operating income view is correct.
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Aysha Ali
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