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Which would occur if a firm is financed entirely with equity

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Reference no: EM132795914

problem 1: If a firm is financed entirely with equity and a small amount of debt is substituted for equity in the capital structure, which of the following would occur?

a. WACC would decrease, because equity costs decrease as debt is added
b. WACC would increase, because overall risk is increased slightly and debt costs more than equity
c. WACC would increase, because the market rewards organizations that can remain debt-free
d. WACC would decrease while the debt ratio would be low and the coverage ratio high

Reference no: EM132795914

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