6.5 – Discussion
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discussion3.jpgThe supplemental materials describe the
process of calculating WACC Preview the documentView in a new window (PDF) and
go on to apply the results to valuing a firm both unlevered (no debt) and
levered (debt). The levered firm is shown to be more valuable. Two identical
firms (see the supplemental materials) and the firm with debt is more highly
valued. Does this make sense? Why or Why not? Why not use 100 percent debt
financing if debt increases value?
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