Cost of capital of a company financed

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Question: Indicate whether each of the following statements is true or false. Support your answers with the relevant explanations

Modigliani and Miller's Proposition II assumes that increased borrowing does not affect the interest rate on the firm's debt.

Under the conditions of perfect capital markets, the cost of capital of a company financed fully by equity is expected to be equal to that of the same company but financed with 50% equity and 50% debt.

Reference no: EM133432246

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