A firm’s current balance sheet is as follows:
What course of action should the firm take? Round your answer to the nearest whole number.
Since the firm is currently using % debt financing, it at its optimal capital structure and
The cost of capital initially
If a firm uses too much debt financing, the firm becomes financially leveraged and riskier. This causes the interest rate to and the cost of equity to . These changes in thecost of debt and equity cause the cost of capital to .
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