According to the moderate view of capital structure theory,the cost of common equity is constant regardless of the debt financing level.

Question

Quizplus · Accepted Answer

The moderate view of capital structure theory suggests that the cost of common equity increases as the level of debt financing increases. This is because higher debt levels increase the financial risk faced by the firm, causing investors to demand a higher return on their equity investment to compensate for the increased risk. Therefore, the cost of common equity is not constant in this view.

According to the Moderate View of Capital Structure Theory,the Cost