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57 58 59 60 Question Four a) Typically, financing with debt increases the ordinary shareholders' expected rate of return for an investment, but debt also

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57 58 59 60 Question Four a) Typically, financing with debt increases the ordinary shareholders' expected rate of return for an investment, but debt also increases the ordinary shareholders' risk. Discuss some of the ways in which a higher proportion of debt can affect the free cash flow (FCF) of a firm. (10 marks) b) Explain the concept of financial leverage and illustrate its impact on a firm's earnings per share (EPS) (10 marks) 61 62 63

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