facebookFor a business, is cost of debt or cost of equity cheaper? - Seedly

Anonymous

18 Apr 2019

Stocks

For a business, is cost of debt or cost of equity cheaper?

Discussion (1)

What are your thoughts?

Learn how to style your text

Isaac Chan

08 Mar 2019

Business at NUS

Typically, it should be the cost of debt. Debt holders have less default risk than shareholders because they are more senior in terms of being claimants of the business.

The business can also benefit from an interest tax shield because interest is in most cases, tax deductible, which lowers the "actual" interest expense before you get to net income.

Write your thoughts