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It is not uncommon to hear people say that because debt has a lower cost of capital than equity, a firm can reduce its overall
It is not uncommon to hear people say that because debt has a lower cost of capital than equity, a firm can reduce its overall WACC by increasing the amount of debt financing. If this strategy works, shouldnt a firm take on as much debt as possible, at least as long as the debt is not risky? Explain your answer using M&M Proposition II
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