The XYZ company currently has a debt-to-equity ratio of 20%. Assume no taxes and perfect contracting. 1:If
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Question:
The XYZ company currently has a debt-to-equity ratio of 20%. Assume no taxes and perfect contracting.
1:If the XYZ company decides to increase their debt-to-equity ratio to 40%, what will happen to their cost of equity?
A:The cost of equity will stay the same
B:The cost of equity will go down
C:The cost of equity will go up
2:If the XYZ company decides to increase their debt-to-equity ratio to 40%, what will happen to their total cost of capital?
A:The total cost of capital will go down
B:The total cost of capital will go up
C:The total cost of capital will stay the same
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