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03-12-2019
Business

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"Under MM Proposition II, a firm's cost of equity capital is ______ related to the firm's debt-equity ratio provided the cost of capital for an all-equity firm exceeds the cost of debt."

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ewomazinoade ewomazinoade

03-12-2019

Answer:

Directly

Explanation:

The cost of equity is directly related to a company's debt to equity ratio.

As the use of debt increases, the cost of equity increases to maintain a constant weighted average cost of capital.

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