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Which of the following consequences of increasing the debt of the firm causes the WACC to decrease? 1) Debtholders having a prior claim to stockholders

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Which of the following consequences of increasing the debt of the firm causes the WACC to decrease? 1) Debtholders having a prior claim to stockholders ii) Interest rate tax shield III) The increased risk of bankruptcy M The cost of debt being less than the cost of equity I,II, and IV I and II II and III II and IV I and IV

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