In each of the theories of capital structure,the cost of equity increases as the amount of debt increases.So why don't financial managers use as little debt as possible to keep the cost of equity down?
After all,aren't financial managers supposed to maximize the value of a firm?

Question

In each of the theories of capital structure,the cost of equity increases as the amount of debt increases.So why don't financial managers use as little debt as possible to keep the cost of equity down?
 After all,aren't financial managers supposed to maximize the value of a firm?

Quizplus · Accepted Answer

The Answer of In each of the theories of capital structure,the cost of equity increases as the amount of debt increases.So why don't financial managers use as little debt as possible to keep the cost of equity down?
 After all,aren't financial managers supposed to maximize the value of a firm?

In Each of the Theories of Capital Structure,the Cost of Equity