Review the list and identify which items are correct

Reference no: EM133616798

Problem: Suppose you are conducting a workshop on capital structure decisions and you want to highlight certain key issues related to capital structure. Your assistant has made a list of points for your session, but he thinks he might have made some mistakes. Review the list and identify which items are correct. Risks of bankruptcy increase management spending on perquisites and increase agency costs. An increase in debt financing beyond a certain point is likely to increase the firm's cost of equity. The pre-tax cost of debt increases as a firm's risk of bankruptcy increases. An increase in the risk of bankruptcy is likely to reduce a firm's free cash flows in the future. An increase in debt financing decreases the risk of bankruptcy.

Reference no: EM133616798

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