Why is cost of debt capital less than the cost of equity share capital ?
Equity shares have higher risk than debt from the investor's perspective. Debt holders have priority in contractual payments, while equity holders receive the residual…
Choose your answer
Why is cost of debt capital less than the cost of equity share capital ?
Answer and explanation
Correct answer C
Equity shares have higher risk than debt from the investor's perspective. Debt holders have priority in contractual payments, while equity holders receive the residual return and therefore require a higher expected return.
Practice for these exams
-
Madhya Pradesh SET (MP SET)