Debt Financing Is Made Up of Explicit and Implicit Costs

question 48

Multiple Choice

Debt financing is made up of explicit and implicit costs which are:

• A)a higher required ROE and the interest rate bondholders demand, respectively.
• B)the interest rate bondholder's demand and a higher required ROE, respectively.
• C)the costs of equity and debt, respectively.
• D)the costs of issuing bonds and the interest rate bondholders demand, respectively.

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Definitions:

Innovative Software

Software designed with new, or significantly improved, technologies or methodologies, often offering enhanced functionalities.

Product Sales

Revenues generated from the sale of goods or services in the normal course of a company's operations.

Competitive Nature

The inherent traits or dynamics within markets where businesses strive to gain advantages over others to secure more customers or profit.

Governmental Order

A directive issued by a government authority, which can include regulations, directives, decisions, laws, or administrative acts.