The Cost of Debt, Rd, Is Normally Less Than Rs

question 14

True/False

The cost of debt, rd, is normally less than rs, so rd(1 - T) will normally be less than rs. Therefore, as long as the firm is not completely debt financed, the WACC will normally be greater than rd(1 - T).

---

Definitions:

Factor Analysis

A statistical approach that explains the variation among observed, interrelated variables through a smaller set of unseen variables, known as factors.

Biological Factors

Aspects of biological systems, including genetic, neurological, or physiological conditions, that influence an individual's behavior or health.

Social-cognitive Perspective

A psychological approach that emphasizes the impact of cognitive processes and social interactions on behavior.

Albert Bandura

A psychologist known for his work in social learning theory, emphasizing the role of observational learning, self-efficacy, and reciprocal determinism in behavior.