An Implicit Cost of Increasing the Proportion of Debt in a Firm's

question 27

Multiple Choice

An implicit cost of increasing the proportion of debt in a firm's capital structure is that:

• A)the firm's asset beta will increase.
• B)equity holders will demand a higher rate of return.
• C)the tax shield will not apply to the added debt.
• D)the equity-to-value ratio will decrease.

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Definitions:

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Hyperthermia Blanket

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