According to Modigliani and Miller Proposition II, the cost of equity increases as more debt is issued, but the weighted average cost of capital remains unchanged.

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According to Modigliani and Miller Proposition II, the cost of equity increases as more debt is issued because the risk to equity holders increases. However, the overall weighted average cost of capital remains unchanged since the lower cost of debt offsets the higher cost of equity.

According to Modigliani and Miller Proposition II, the Cost of Equity