With perfect capital markets,leverage has ________ effect on firm value or the firm's overall cost of capital.

Question

Quizplus · Accepted Answer

Perfect capital markets mean that all investors have equal access to information and the ability to borrow and lend at the same rates. In such markets, the value of a firm is based solely on its underlying assets and operations, not on its capital structure or degree of leverage. Therefore, the use of leverage does not affect the firm's value or overall cost of capital.

With Perfect Capital Markets,leverage Has ________ Effect on Firm Value