Debt Is Generally the Least Expensive Source of Capital

question 44

Multiple Choice

Debt is generally the least expensive source of capital. This is primarily due to

• A) the tax deductibility of interest payments.
• B) its position in the priority of claims on assets and earnings in the event of liquidation.
• C) the secured nature of a debt obligation.
• D) fixed interest payments.

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Definitions:

Optimal Quantity

The amount of a good or service that maximizes a consumer's satisfaction or a producer's profit given certain constraints and objectives.

Consumers

Individuals or organizations that use economic goods and services produced within an economy.

Firms

Business entities or organizations that produce goods or provide services with the aim of making a profit, often operating within specific industries or markets.

Economic Theory

A set of principles and models that explains how economies operate and how economic agents interact.