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What are the direct and indirect costs of financial distress

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Reference no: EM132551197

-'If a firm issues debt that is risk free because there is no possibility of default, the risk of the firm's equity does not change. Therefore, risk-free debt allows the firm to get the benefit of a low cost of capital of debt without raising its cost of capital of equity'. Critically evaluate the above statement.

-What are the direct and indirect costs of financial distress? Explain

-Critically evaluated the impact of asymmetric information on the firm's capital structure decisions? How do the firm's financing actions give investors signals that reflect management's view of stock value?

Reference no: EM132551197

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