A Firm Should Use as Much Non-Financial Liability Financing as It

question 43

Multiple Choice

A firm should use as much non-financial liability financing as it can if

• A)arbitrageurs can easily and quickly undo choices that are suboptimal.
• B)its risk-adjusted cost of capital is below that of other sources of financing.
• C)there is an operational linkage involved.
• D)None of the above is true; a firm should try to limit the amount of non-financial liability financing it uses.

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