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What would happen to share price

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Reference no: EM133076174

Question 1:

As the cost of debt, k_d, is always less than the cost of equity, k_e, companies should maximise the use of debt to maximise return. Comment on this statement.

Question 2:

In a world of tax, if a firm went from a very low debt level to successively a higher levels of debt, what would happen to share price? Explain your answer.

Reference no: EM133076174

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