Which of the following statements is false if capital markets have only taxes as the market imperfection? A. Leverage reduces the weighted average cost of capital B. There is an optimal capital structure that can maximize firm value C. Leverage increases the cost of equity D. Leverage increases firm value
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Leverage reduces the weighted average cost of capital - This statement is true. When a company uses debt financing, the interest expense is tax-deductible, which reduces the company's overall cost of capital. B. There is an optimal capital structure that can Show more…
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