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Please, assume the economy in which there are taxes and financial distress costs. Assume the firm is currently at its optimal capital structure of 25%
Please, assume the economy in which there are taxes and financial distress costs. Assume the firm is currently at its optimal capital structure of 25% debt and 75% equity. Suppose the firm increases its debt to 40%.
Which of the following is true? I Cost of debt will likely increase II The value of the firm will likely increase
None of the above. | ||
III only | ||
I and II | ||
I only |
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