Finance Discussion: Presentation to the Board of Directors, the Pros and Con of Debt Financing
The calculation of after-tax cost of debt plays a role in managing capital costs. You have been asked to present a few matters related to Debt (Bond) financing to the Board of Directors.
• Please briefly explain to the Board: 1) the usual collateral position of Bondholders (lenders) versus Equity investors, 2) why common stockholders can demand a higher rate of return than lenders, and 3) why you would suggest debt (or equity) financing.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.