If a company's return on assets is substantially higher than its cost of borrowing,then the common stockholders would normally want the company to have a relatively high debt/equity ratio.

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If a company's return on assets is substantially higher than its cost of borrowing, it means that the company is generating large profits and has the ability to pay off its debt. Therefore, common stockholders would prefer the company to have a higher debt/equity ratio, as this allows them to benefit from the profits without diluting their ownership in the company.

If a Company's Return on Assets Is Substantially Higher Than