In Each of the Theories of Capital Structure,the Cost of Equity

question 65

Essay

In each of the theories of capital structure,the cost of equity increases 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,aren't financial managers supposed to maximize the value of a firm?

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Definitions:

Black-hat Hacker

An individual who violates computer security for maliciousness or personal gain, as opposed to ethical purposes.

Cyberloafing

The act of using an employer's Internet and computing resources for personal activities during work hours.

Social Engineering

A manipulation technique that exploits human error to gain private information, access, or valuables, often through deceiving individuals.

White-hat Hacker

An ethical computer security expert who penetrates systems to identify security weaknesses with the intention of fixing them.