Question
Which of the following statements is most correct? I have tried C and it was wrong. Since debt financing raises the firm's financial risk, raising
Which of the following statements is most correct? I have tried C and it was wrong.
Since debt financing raises the firm's financial risk, raising a companys debt ratio will always increase the companys WACC.
Since debt financing is cheaper than equity financing, raising a companys debt ratio will always reduce the companys WACC.
Increasing a companys debt ratio will typically reduce the marginal cost of both debt and equity financing; however, it still may raise the companys WACC
Statements a and c are correct.
None of the statements above is correct.
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