3. Under perfect capital markets conditions, what happens when a company takes on new debt? Note...
3. Under perfect capital markets conditions, what happens when a company takes on new debt? Note that several answers may be correct.
a) It reduces its cost of capital
b) It does not affect its cost of capital
c) It increases its cost of capital
d) It increases its cost of equity
e) It decreases its cost of equity
Homework Answers
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correct answer is option : d) It increases its cost of equity. and c) It increases its cost of capital
Exp: If the debt is raised than risk will increase for which common share holder will demand more return means higher cost of equity.
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3. Under perfect capital markets conditions, what happens when a
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