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Two firms are considering borrowing. One firm has very good prospects in terms of future projects and is in an area in which cash flows

Two firms are considering borrowing. One firm has very good prospects in terms of future projects and is in an area in which cash flows are volatile and future needs are difficult to assess. The other firm has more stable cash flows and fewer project opportunities and predicts its future needs with more precision. Other things remaining equal, which of these two firms should borrow more?

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