1 advantages and disadvantages of debt1 debt and discipline, Ask an Expert

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[1] Advantages and disadvantages of debt

(1) Debt and discipline. A firm whose management does its best to pay a regular and fixed dividend does not need the discipline provided by debt. Do you agree with this opinion? Briefly explain your answer.

(2) Debt vs. equity. Debt is cheaper than equity. Therefore the optimal debt ratio is all debt. Do you agree with this opinion? Briefly explain your answer.

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