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Author Question: If investors aversion to risk rose, causing the slope of the SML to increase, this would have a ... (Read 79 times)

rubiosusy7

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on: Aug 7, 2023

Question 1

If Firm X carries more risk than Firm Y, then X’s cost of debt can possibly be greater than Y’s cost of equity.

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Question 2

If investors’ aversion to risk rose, causing the slope of the SML to increase, this would have a greater impact on the required rate of return on equity, rs, than on the interest rate on long-term debt, rd, for most firms. Other things held constant, this would lead to an increase in the use of debt and a decrease in the use of equity. Therefore, most firms can raise funds only through debt toachievea minimum WACC. 

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Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by rubiosusy7 on Aug 7, 2023

Afvelasquez

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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rubiosusy7

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Reply 2 on: Aug 7, 2023
YES! Correct, THANKS for helping me on my review

alexanderhamilton

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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