As Financial Leverage Increases, the Cost of Debt Remains Constant

question 163

True/False

As financial leverage increases, the cost of debt remains constant and then rises, while the cost of equity always rises.

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Definitions:

Low Tolerance

A minimal level of patience or ability to endure something, especially discomfort, opposing opinions, or behaviors.

Inappropriate Activity

Actions or behaviors that are not suitable or proper in a given context or situation.

Intelligence

The capacity to understand the world, think with rationality, and use resources effectively when faced with challenges.

Rationality

The quality of being based on or in accordance with reason or logic.