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Question: assume company xyzs currently has 1000 in total assets and...

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  1. Assume Company XYZ’s currently has $1000 in total assets and the higher the firm’s debt level, the higher the risk of bankruptcy. If the CFO is looking to maximize firm value, Company XYX should:

    1. borrow an additional $400 in debt

    2. repay or retire $400 in debt

    3. borrow an additional $200 in debt

    4. repay or retire $200 in debt

    5. make no changes to the capital structure

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