The cost of equity or the cost of debt

Which is lesser for a particular company: the cost of equity or the cost of debt (ignoring taxes)?  Explain.

E

Expert

Verified

The debt cost is less than the equity cost for a particular firm. This is mainly since the debt investor is taking a risk which is lower than the equity investor and thus the required rate of return is lower.

   Related Questions in Financial Management

©TutorsGlobe All rights reserved 2022-2023.