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If a Firm Increases Its Use of Both Operating and Financial

Question 1

Multiple Choice

If a firm increases its use of both operating and financial leverage,then you should expect the firm's:


A) asset beta to exceed its equity beta.
B) beta of debt to exceed 1.0.
C) beta to remain constant as the increased operating leverage will offset the increased financial leverage.
D) equity beta to increase.
E) debt beta to exceed its equity beta.

Correct Answer:

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