Question
12) The leverage ratchet effect would predict all of the following occurrences EXCEPT: A) when an unlevered firm issues debt for the first time, equity
12) The leverage ratchet effect would predict all of the following occurrences EXCEPT:
A) when an unlevered firm issues debt for the first time, equity holders will bear agency or bankruptcy costs
B) when additional debt is issued, the risk associated with agency or bankruptcy costs to equity holders will intensify
C) with some debt in the firm's capital structure, shareholders may have an incentive to increase leverage
D) why a firm in distress would not issue equity to reduce leverage
Answer:
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Financial Markets And Institutions
Authors: Anthony Saunders, Marcia Cornett
4th Edition
0077262379, 978-0077262372
