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    Multiple choice

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    Which of the following statements is likely to encourage a firm to increase the amount of debt in its capital structure?

    Its sales become less stable over time.
    Bankruptcy costs have increased.
    Management believes that the firmâ??s stock is overvalued.
    Its corporate tax rate increases.

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    Solution Preview

    Its corporate tax rate increases.

    The effective cost of debt ...

    Solution Summary

    The solution explains the correct alternative in relation to increasing the amount of debt

    $2.19

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