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How does the decision to finance with a greater percentage of debt versus stock impact: a) shareholders’...

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Question

Finance

How does the decision to finance with a greater percentage ofdebt versus stock impact:

a) shareholders’ earnings per share

b) company risk exposure

c) the WACC for the company

Answer & Explanation Solved by verified expert
3.7 Ratings (551 Votes)
a While choosing between financing through debt or stock EPS goes down in case of debt financing as increased debt servicing interest expense depresses net income Net Income is the denominator of the EPS equation with the denominator of shareholders equity remaining constant In    See Answer
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How does the decision to finance with a greater percentage ofdebt versus stock impact:a) shareholders’ earnings per shareb) company risk exposurec) the WACC for the company

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