This will lead to the company rejecting projects even if their net present value is positive and have the potential to increase the company’s value Robin, (2001).Capital structure is very important to a company’s value; the capital structure will determine the end value of the company whereby the value of the company will be determined by the level of equity and debts.
Debts are preferred by companies than equity, the company will finance itself internally, and then finance itself using debts, and when these debts are finished then the firm will finance through equity through sales of stock.
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