If we assume that EBIT is constant, the value of the firm is maximized by minimizing the weighted average cost of capital.

Question

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The value of the firm is maximized when the weighted average cost of capital is minimized, assuming that EBIT (earnings before interest and taxes) is constant. This is because the lower the cost of capital, the higher the value of future cash flows generated by the firm, and thus the higher the value of the firm overall.

If We Assume That EBIT Is Constant, the Value of the Firm