Although Debt Financing Is Usually the Cheapest Component of Capital,it

question 142

Multiple Choice

Although debt financing is usually the cheapest component of capital,it cannot be used to excess because:

• A) interest rates may change.
• B) the firm's share price will increase and raise the cost of equity financing.
• C) the financial risk of the firm may increase and thus drive up the cost of all sources of financing.
• D) underwriting costs may change.

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Definitions:

Ohio State University

A large, public research university located in Columbus, Ohio, known for its extensive academic programs and research initiatives.

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