You work for a large car manufacturer that is currently financially healthy. Your manager feels that the

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You work for a large car manufacturer that is currently financially healthy. Your manager feels that the firm should take on more debt because it can thereby reduce the expense of car warranties. To quote your manager, "If we go bankrupt, we don't have to service the warranties. We therefore have lower bankruptcy costs than most corporations, so we should use more debt." Is he right?
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Corporate Finance

ISBN: 978-0134083278

4th edition

Authors: Jonathan Berk, Peter DeMarzo

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