Solved: Benefit of a low cost of capital of debt, Finance Basics

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Benefit of a low cost of capital of debt

Problem:

What is wrong with the following argument: "If a firm issues debt that is risk free, because there is no possibility of default, the risk of the firm's equity does not change. Therefore, risk-free debt allows the firm to get the benefit of a low cost of capital of debt without raising its cost of capital of equity"?

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Finance Basics: Benefit of a low cost of capital of debt

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Finance Basics: Benefit of a low cost of capital of debt

Reference No:- TGS02038895

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