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“The cost of equity can never be cheaper than the cost of debt considering an equity...

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Finance

“The cost of equity can never be cheaper than the cost of debtconsidering an equity investor is the last taker of funds, shouldthe worse come to worst for the issuer. And he requirescompensation for such risk”.

Critically evaluate the remark above from the viewpoint ofglobal finance.

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In equity financing companies obtained funds in exchange of ownership of company The firms sell their shares ownership stakes in the proportion of funding obtained The Equity holders share profit as well as losses of the company like an owner But in debt financing    See Answer
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Transcribed Image Text

“The cost of equity can never be cheaper than the cost of debtconsidering an equity investor is the last taker of funds, shouldthe worse come to worst for the issuer. And he requirescompensation for such risk”.Critically evaluate the remark above from the viewpoint ofglobal finance.

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