Is it right to say “The greater a company’s business risk, the lower its optimal debt ratio”
no not at all. Higher business risk means higher required return on equity, so more debt will lower WACC which will increase the value of the firm.
Is it right to say “The greater a company’s business risk, the lower its optimal debt ratio”
no not at all. Higher business risk means higher required return on equity, so more debt will lower WACC which will increase the value of the firm.