ROA

why is this statement incorrect? As long as ROA is greater than the cost of debt financing, additional financial leverage (holding other factors unchanged) will always increase the firms ROE and the value of its common stock

I agree with the first part the firms ROE will increase but not too sure about the value of common stock- depends what kind of value - if we are talking market value maybe not cause investors will adjust the returns to increased risk (more debt more risk) other than that higher eps will increase the value of the common stock