Question
If a negative EFN (External Financing Needed, aka AFN) is lessening the firms debt because of the ability to pay off existing debt, then it
"If a negative EFN (External Financing Needed, aka AFN) is lessening the firms debt because of the ability to pay off existing debt, then it is also reducing the cost of capital."
The above statement is considered to be incorrect because it doesn't make sense that paying off the cheapest form of capital lowers the cost of capital. Can someone correct this?
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Intermediate Financial Management
Authors: Eugene F. Brigham, Phillip R. Daves
7th Edition
0030333288, 9780030333286
