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    Cost of capital

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    A. As a firm initially substitutes debt for equity financing, what happens to the cost of capital, and why?

    b. If a firm uses too much debt financing, why does the cost of capital rise?

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    https://brainmass.com/business/working-capital-management/cost-of-capital-186119

    Solution Preview

    a. As a firm initially substitutes debt for equity financing, what happens to the cost of capital, and why?

    As a firm initially substitutes debt for equity financing, the cost of capital will be declined. This is due to the ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what happens to the cost of capital, and why does the cost of capital rise.

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