In Each of the Theories of Capital Structure the Cost

question 59

Essay

In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down?
After all,isn't the goal of the firm to maximize share value and minimize shareholder costs?

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Definitions:

TOF Timer

A type of PLC timer that measures the "Time-Off-Fall" or the time it takes for a signal to turn from on to off.

Retentive

Memory or functions in a control system that retain their value or state even after the system is powered down or rebooted.

Nonretentive

In PLC programming, a term referring to memory or data that is not retained after power loss.