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Which of the following statements about the corporate cost of capital is most correct ? Because the use of debt financing increases a businesss financial
Which of the following statements about the corporate cost of capital is most correct?
Because the use of debt financing increases a businesss financial risk, increasing the debt ratio will always increase the corporate cost of capital. |
Because debt financing is less costly than equity financing, increasing the debt ratio will always reduce the corporate cost of capital. |
Increasing the debt ratio typically will reduce the marginal cost of both debt and equity; however, it still may increase the corporate cost of capital. |
Statements a. and c. are correct. |
None of the above statements is correct. |
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