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2. Short answer questions. [2 points each] (1) Why should companies prefer to issue debt rather than equity if internal financing is insufficient? (2) Why

2. Short answer questions. [2 points each]

(1) Why should companies prefer to issue debt rather than equity if internal financing is insufficient?

(2) Why do we care about WACC?

(3) Why do shareholders of a company with poor quality of corporate governance demand high payout, whenever possible?

(4) Why does capital budgeting eventually impact the cost of capital?

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