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The Chief Financial Officer at The b3 Milk Company Limited notes that the companys cost of debt is below its cost of equity. She reasons
The Chief Financial Officer at The b3 Milk Company Limited notes that the companys cost of debt is below its cost of equity. She reasons that the company should ensure that it is able to increase its borrowings, because otherwise the it will be forced to use more expensive equity to finance its new projects. If it used equity then, the company might have to reject some projects that it would have accepted when evaluated at the lower cost of debt. Comment on this reasoning.
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