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hi! please answer the below asap!!! Consider a firm with a cost of debt of 8% and cost of equity 15%. Can the firm reduce
hi! please answer the below asap!!!
Consider a firm with a cost of debt of 8% and cost of equity 15%. Can the firm reduce its wacc by borrowing more and using the borrowed funds to buy back equity? Yes, if M&M Proposition 1 without taxes holds Yes if M&M Proposition 1 with taxes holds, but no if M&M Proposition 1 without taxes holds O No, the wacc will increase if M&M Proposition 1 without taxes holds No, the wacc will not change if M&M Proposition 1 with taxes holds Yes, increasing the weight of the cheaper source of capital (debt) will certainly reduce the firm's waccStep by Step Solution
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