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The Chief Financial Officer at HB Electronics Notes That Its

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The Chief Financial Officer at HB Electronics notes that its cost of debt is below that of equity.He reasons that the firm should ensure that it is able to increase its borrowings,because otherwise the firm will be forced to use more expensive equity to finance its new projects.Then,the firm may have to reject some projects that it would have accepted when evaluated at the lower cost of debt.Comment on this reasoning.


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