Which is most correct? Rational firms raise debt levels when profits are expected to decline. Investors will generally v
Posted: Wed Apr 06, 2022 9:11 am
Which is most correct?
Rational firms raise debt levels when profits are expected to
decline.
Investors will generally view an increase in leverage as a
positive sign of the firm's value.
A firm with low anticipated profits will likely take on a high
level of debt.
High-growth firms with future positive net present value
projects tend to have high levels of debt.
Rational investors are likely to infer a higher firm value if a
firm is all-equity financed.
Rational firms raise debt levels when profits are expected to
decline.
Investors will generally view an increase in leverage as a
positive sign of the firm's value.
A firm with low anticipated profits will likely take on a high
level of debt.
High-growth firms with future positive net present value
projects tend to have high levels of debt.
Rational investors are likely to infer a higher firm value if a
firm is all-equity financed.