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Which of the following is correct? As long as a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce
Which of the following is correct? As long as a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce its WACC by increasing its use of debt The capital structure that maximizes the common share price is also the capital structure that maximizes earnings per share A company should always increase its debt-equity ratio as long as the incremental tax savings from doing so are greater than all other incremental costs Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing: however, this still may raise the company's WACC
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