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-   -   Which of the following statement is INCORRECT regarding financial leverage ? (https://www.askmehelpdesk.com/showthread.php?t=494853)

  • Aug 4, 2010, 10:54 AM
    zeeshanmustafa
    Which of the following statement is INCORRECT regarding financial leverage ?
    Which of the following statement is INCORRECT regarding financial leverage ?
    Financial leverage can dramatically alter the payoffs to the shareholders.
    Financial leverage refers to the extent to which a firm relies on the debt.
    Financial leverage must affect the overall cost of capital in any condition.
    Financial leverage may not affect the overall cost of capital.
  • Aug 4, 2010, 12:15 PM
    ArcSine
    Hint #1: Read https://www.askmehelpdesk.com/financ...-b-u-font.html

    Hint #2: Suppose a situation involving a levered firm, in which the debt and the equity have the same after-tax capital cost. What happens to the WACC if the leverage is increased (assuming the specific component costs of the debt and equity remain unchanged)?

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