Which of the following is an implicit cost of increasing proportion of debt of a company ?

Question

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NA

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P.E. Ratio of the company would increase

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Rate of return of the company would decrease.

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Tax-shield would not be available on new debts.

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Equity shareholders would demand higher return

1.	Which of the following is an implicit cost of increasing proportion of debt of a company ?
A.	P.E. Ratio of the company would increase
B.	Rate of return of the company would decrease.
C.	Tax-shield would not be available on new debts.
D.	Equity shareholders would demand higher return
Answer» E.

Discussion