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Answer the following questions. Each answer must have an academic source cited in APA 6th edition. References need to be included as well: 1. Some companies debt-equity targets are expressed not as a debt ratio, but as a target debt rating on a firms outstanding bonds. What are the pros and cons of setting a target rating, rather than a target ratio? 2. The WACC formula seems to imply that debt is "cheaper" than equity--that is, that a firm with more debt could use a lower discount rate. Does this make sense? Explain briefly.
Date Posted: 04/05/2015
Category: General
Due Date: 05/05/2015
Due Date: 05/05/2015
Instruction
Answer the following questions. Each answer must have an academic source cited in APA 6th edition. References need to be included as well:
1. Some companies debt-equity targets are expressed not as a debt ratio, but as a target debt rating on a firms outstanding bonds. What are the pros and cons of setting a target rating, rather than a target ratio? 2. The WACC formula seems to imply that debt is "cheaper" than equity--that is, that a firm with more debt could use a lower discount rate. Does this make sense? Explain briefly.
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