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A firm increases the proportion of equity in its capital structure by issuing shares to repay a bank loan. Which statement is the most correct?
A firm increases the proportion of equity in its capital structure by issuing shares to repay a bank loan. Which statement is the most correct? a. The before-tax weighted average cost of capital (WACC) will not change. O b. The required return on equity will increase. c. The costs and probability of financial distress will be higher for the firm. d. Shareholders will be better off due to amplified profits. e. Ignoring tax, a shareholder who requires higher leverage can personally lend excess cash in the market to achieve the same benefits
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