Other things held constant which of the following events would be

Question

Other things held constant, which of the following events would be most likely to encourage a firm to increase the amount of debt in its capital structure?

a. Its sales are projected to become less stable in the future.

b. The bankruptcy laws are changed in a way that would make bankruptcy more costly to the firm and its stockholders.

c. Management believes that the firm's stock is currently overvalued.

d. The firm decides to automate its factory with specialized equipment and thus increase its use of operating leverage.

e. The corporate tax rate is increased.

Answer

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