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According to M&M Proposition 2, the cost of a firm's equity increases with the increase of cost of debt. decreases with increase of required rate

According to M&M Proposition 2, the cost of a firm's equity

increases with the increase of cost of debt.

decreases with increase of required rate of return on the firm's underlying assets.

increases with the increase of debt-to-equity ratio.

decreases with the decrease of debt-to-equity ratio.

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