The cost of debt is Blank______. Multiple choice question. the opportunity cost lost by a firm's long-term creditors when investing on the firm the return that a firm's equity investors require on their investment in the firm the return that a firm's long-term creditors demand on new borrowing the opportunity cost of the credit given by the short-term creditors

In general, debt financing is _______  than equity financing. A firm’s ______ has priority in claiming the company’s assets.   Question 17 options:   1)  less costly, shareholders   2)  less costly, lender   3)  more costly, shareholders   4)  more costly, lender

Answer the first question

Financing with Debt Versus Equity. It is commonly understood that the cost of financing a business’sasset purchases with debt is cheaper than financing those purchases with equity. Discuss why debt financing is cheaper than equity financing. Is there a set of circumstances when the cost of debt financing would exceed the cost of equity financing? If so, when?

Banks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to have a positive gap, this means: Group of answer choices C. Rate-sensitive assets exceed rate-sensitive liabilities B. Long-term assets are funded with short-term liabilities D. Rate-sensitive assets equal rate-sensitive liabilities A. Liabilities reprice before assets

Which of the following is a disadvantage of long-term debt as a means of company financing? Group of answer choices Debtholders have preferential status in the event of a company being wound up. Tax relief is available on interest payments. Debt is often quicker to arrange compared to equity. The amount and timing of interest payments is predictable, making budgeting easier.

Answer the second question

Which of the following is an advantage of debt financing?    a. Excessive debt increases the risk of equity holders and therefore depresses share price. b. The obligation is generally fixed in terms of interest and principal payments. c. Interest and principal obligations must be paid regardless of the economic position of the firm. d. Debt agreements contain covenants.

A firm will have a financing _________ whenever projected assets are greater than projected liabilities and equity. This is best remedied with _________.      Deficit; line of credit     Deficit; special dividend     Surplus; line of credit     Surplus; special dividend

There are advantages and disadvantages of debt financing in contrast to equity financing. Which of the following is less likely to represent an advantage of debt financing? a. The cost of debt should be lower than the cost of equity for most companies due to the lower risk to the lender and the tax deductibility of interest b. The repayment of debt capital may affect the liquidity of the company c. If the return on assets exceeds the cost of debt, then this will result in a higher return on shareholders’ funds as compared to the return on assets d. The increase in borrowings will not normally affect the voting control of the current shareholders as compared to the issue of shares e. Fixed interest rate loans will result in the variability in the market value of such loans over time which will normally be less than the variability in the value of the equity of the company