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4. The following graph shows how an MNC's cost of capital depends on its debt ratio which is measured by the amount of total debt

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4. The following graph shows how an MNC's cost of capital depends on its debt ratio which is measured by the amount of total debt (D) to total equity (E). Consider two corporations A and B with their corresponding debt ratios as illustrated on the graph. (i) Comment on the following statement: To minimize the cost of capital, both MNCs reduce borrowings and issue more shares. (ii) How using too much debt could lead an MNC to bankruptcy

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