Firm cost of capital when the debt-equity ratio increases

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The aftertax cost of debt: will generally exceed the cost of equity if the relevant tax rate is zero. Will generally equal the cost of preferred if the tax rate is zero. is unaffected by changes in the market rate of interest. has a greater effect on a firm's cost of capital when the debt-equity ratio increases. varies inversely to changes in market interest rates.

Reference no: EM13938343

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