Multiple Choice
If a firm chose to increase its debt ratio from 20% to 40%, what is the potential risk?
A) The average cost of capital would most likely rise.
B) The price of the firm's common stock would definitely decline.
C) If economic forces cause a reduction of sales, the firm's EPS might decline.
D) The firm's WACC might decline.
Correct Answer:
Verified
Correct Answer:
Verified
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