Assume that a firm's financial analysts determine that a decrease in the firm's debt-to-assets ratio will cause a decrease in both the component cost of debt r_d(1 − T)and the component cost of equity (r_s).This information tells us that the firm's present debt-to-assets ratio is above its optimal ratio.

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The Answer of Assume that a firm's financial analysts determine that a decrease in the firm's debt-to-assets ratio will cause a decrease in both the component cost of debt r_d(1 − T)and the component cost of equity (r_s).This information tells us that the firm's present debt-to-assets ratio is above its optimal ratio.

Assume That a Firm's Financial Analysts Determine That a Decrease