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Steve Cooley, the Chief Financial Officer for Canberra Corporation, decides that he wants to use as much debt as possible in his firm’s capital structure. Cooley knows that to use more debt, he will need to make a persuasive argument to his board. Which of the following arguments used by Cooley to help with his goal of raising large amounts of additional debt is least supported by empirical evidence? A. The cost of debt is always cheaper than the cost of equity. B. Raising additional debt provides a signal to our shareholders that our firm’s future prospects are positive. C. Increasing the amount of debt has an insignificant impact on our credit risk premium. |