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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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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 ...

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