Explain three forces that can make equity cheaper than debt for corporate financing.
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Explain three forces that can make equity cheaper than debt for corporate financing.
Which of the following statements is CORRECT? Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing; however, this action still may raise the company's WACC Increasing a company's debt ratio will typically increase the marginal cost of both debt and equity financing; however, this action still may lower the company's WACC Since a firm's...
Why can banks with greater equity financing borrow funds cheaper than other banks? A.) Because they have proportionately more financial leverage and hence less risk. B.) Because a greater proportion of their assets have to be in default before they fail. C.) Because they have less credit risk. D.) Because they have lower required reserves.
Why can banks with greater equity financing borrow funds cheaper than other banks? Group of answer choices Because they have proportionately more financial leverage and hence less risk. Because a greater proportion of their assets have to be in default before they fail. Because they have less credit risk. Because they have lower required reserves.
What is the chief difference between debt and equity finance? A. Debt finance is cheaper than equity finance. B.Debt finance involves a fixed stream of payments, equity finance involves a piece of profit streams. C.Debt finance is a much better deal for the borrower. D.Debt finance suggests that the lender does much better when the state of the world is one where the borrower does extremely well (as opposed to just somewhat well). In modern day markets, what is the...
A difference between debt financing and equity financing is that: Multiple Choice debt financing must be repaid, while repayment of equity financing is not required. equity financing must be repaid, while repayment of debt financing is not required. only debt financing can be used to purchase assets. only equity financing can be used to purchase assets.
Debt financing is considered riskier than equity financing because of its required payments of interest and principal. True or False
The difference between equity financing and debt financing is that equity financing involves borrowing money. equity financing involves selling part of the company. debt financing involves selling part of the company. debt financing means the company has no debt.
the cost if common equity financing is more difficult to estimate than the cost of debt and preffered equity why?
Question 10 Sometimes, corporate managers can have incentives to take on more risk than is socially optimal. This sort of agency cost is more severe with: Equity financing Debt financing
true and false . The cost of equity is expected to be higher than the after-tax cost of debt. Therefore, increasing the debt ratio will always lower the cost of capital. Firms with more uncertainty about future investment needs (both in terms of magnitude and type) should generally borrow more money than firms with less uncertainty Debt is cheaper source of financing than Equity. Explain the potential reasons this may be true or false