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Capital Budgeting (Theory) As cost of equity is often higher than cost of debt, companies should reduce their equity capital so as to lower WACC.

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Capital Budgeting (Theory) "As cost of equity is often higher than cost of debt, companies should reduce their equity capital so as to lower WACC." 1. Explain why cost of equity is higher than cost of debt ( 4 marks). 2. Critically evaluate this statement as correct or incorrect ( 6 marks)

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