Growth Company has existing debt issued three years ago with a coupon rate of 6.0%....
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Growth Company has existing debt issued three years ago with a coupon rate of 6.0%. The firm just issued new, otherwise identical debt at par with a coupon rate of 6.5%. Thus for Growth Companys pre-tax cost of debt, it should use a weighted average of 6.0% and 6.5%.
True or False
When corporate tax rates are high, the optimal response of companies is to use relatively more debt rather than equity financing, and to accept fewer projects, leading to less growth.
True
False
When corporate tax rates are high, the optimal response of companies is to use relatively more debt rather than equity financing, and to accept fewer projects, leading to less growth.
True
False
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