Question

The relationship between the cost of equity and financial leverage in accordance with mm proposition ii can be expressed by

Answer 1

The relationship between the cost of equity and financial leverage in accordance with mm proposition ii can be expressed

Answer 2

Answer:

➡ Proposition 2. It says that financial leverage is in direct proportion to the cost of equity. With an increase in the debt component, the equity shareholders perceive a higher risk to the company. Hence, in return, the shareholders expect a higher return, thereby increasing the cost of equity.

✌Follow Me✌