Suppose that a firm has both fixed-rate and floating-rate, Ask an Expert

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Suppose that a firm has both fixed-rate and floating-rate debt outstanding. What effect will an unexpected decline in interest rates have on the firm's times-interest-earned ratio (EBIT/interest paid)? What about the ratio of the market value of debt to that of equity? Would you judge that leverage has increased, decreased or stayed the same? Justify all answers.

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