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Posted by on Thursday, July 24, 2008 at 7:54pm.

13. Although debt financing is usually the cheapest component of capital, it cannot be used to excess because

interest rates may change.
the firm's stock price will increase and raise the cost of equity financing.
the financial risk of the firm may increase and thus drive up the cost of all sources of financing.
underwriting costs may change.

  • finance - , Thursday, July 24, 2008 at 7:58pm

    the financial risk of the firm may increase and thus drive up the cost of all sources of financing

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