Suppose Router borrowed 20% of its capital at a 7.6% rate, then borrowed an additional 20% at a higher rate, bringing its debt up to a total of 40% of capital. If it did this, would it end up with an average cost of debt that is lower than if it had just borrowed the entire 40% in the first place? Would you recommend that it adopt such a strategy?

Answer rating: 100% (QA)

No the average cost of debt would not be low... View the full answer