A firm may initially increase its use of debt without increasing the cost of capital.

Name: A firm may initially increase its use of debt without increasing the cost of capital.
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This is because debt can have a lower cost of capital compared to equity due to the tax deductibility of interest payments. However, as the firm increases its use of debt, it may eventually reach a point where the cost of debt increases and therefore increases the overall cost of capital.

A Firm May Initially Increase Its Use of Debt Without