Value of the firm financed by debt and equity

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COnsider 2 firms, one financed entirely by equity, the other by a mix of debt and equity. Why will risk management ( the purchase of insurance or derivative financial instrument) likely decrease the value of the firm financed only by equity but increase the value of the firm financed only by equity but increase the value of the firm financed by debt and equity?

Reference no: EM131981185

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