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.

---

Definitions:

Bowman Capsule

The Bowman capsule is a cup-like sack at the beginning of the tubular component of a nephron in the kidney, enclosing the glomerulus and involved in filtration.

Countercurrent Mechanism

A process by which fluids flow in opposite directions in adjacent tubes, exchanging properties (such as heat or concentration) to facilitate efficient transfer.

Uric Acid

A waste product formed from the breakdown of purines, excreted in urine.

Kidney Size

Refers to the physical dimensions of the kidneys, which can vary due to factors such as age, sex, body size, and health conditions.