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Number 16 Which of the following statements is CO...

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Number 16 Which of the following statements is CORRECT? Answer a. Since debt financing raises the firm's financial risk, increasing a company's debt ratio will always increase its WACC. b. Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC. c. Since a firm's beta coefficient is not affected by its use of financial leverage, leverage does not affect the cost of equity. d. Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing. However, this action still may raise the company's WACC. e. Increasing a company's debt ratio will typically increase the marginal cost of both debt and equity financing. However, this action still may lower the company's WACC. 12 points

 

Paper#5588 | Written in 18-Jul-2015

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