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Your firm has been plodding along without much attention from the stock market; both analysts and investors are not showing much interest in your company. Your boss insists that (a) he can increase the return on equity of the company by simply taking on more debt; (b) that will increase firm value because of the tax shield from using debt; and (c) there is no downside from issuing more debt given (a) and (b). What is your assessment of his reasoning?

True

False

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Financial Management, Finance

Category:- Financial Management
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