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35) As of Jan 2019, Fitbit had zero debt on its balance sheet. According to MM theory (with taxes) and assuming that Fitbit can borrow
35) As of Jan 2019, Fitbit had zero debt on its balance sheet. According to MM theory (with taxes) and assuming that Fitbit can borrow debt at a cheaper cost than its cost of equity, what would happen if Fitbit increased its leverage ratio conservatively to a point where it did not increase its cost of financial distress? (2 pts) a) Fitbit's company value would increase b) Fitbit's company value would decrease c) Fitbit's company value would remain unchanged d) None of the above 36) As of Jan 2019, Fitbit had zero debt on its balance sheet. If Fitbit's sales and growth were declining, how much of it would be due to a high cost of financial distress as defined in class? (2 pts) a) Financial distress would likely be one of the main reasons b) Financial distress would be one of the reasons, but not the main one c) Financial distress would not be a reason at all d) Can't tell with the limited information given
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