State the reason for which the debt financing have a lower of cost than equity financing.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 14, Problem 1GI

To determine

State the reason for which the debt financing have a lower of cost than equity financing.

Expert Solution & Answer

Explanation of Solution

Debt Financing:

Debt financing refers to the act of raising money to meet the capital expenditures of the Company by selling debt instruments (bills, notes, and bond) to institutional investors or individuals. And then, the institutional investors or individuals become the creditors to whom the principal amount and interest on debt has to be repaid.

Reasons for which the debt financing have a lower of cost than equity financing are as follows:

Investment risk of debt is lower than stock and it offers considerably lower rate of return than stock.
Investors in equity securities usually generate a higher return on their investment.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Whats a good response and question to ask to this post? The county that I am choosing to expand to is Denmark. Below is a brief overview of their political, economic, and legal systems. Political System Denmark is a Constitutional Monarchy. Their chief of state is the Queen and their head of government is the Prime Minister. The government is broken up into three branches, the executive branch, judicial branch, and legislative branch. Economic System Denmark is a developed country with a high income. Not much is able to sway Denmark. Unlike most countries, when Covid was wreaking havoc all over the world, their economy recessed by only 2% in 2020 and continued on to jump back up by 3.8% by 2022. They also have a very low unemployment rate of only 2.7%. Legal System Denmark operates by a civil law system with roots in Germanic Law. They have a medium corruption score of 88 out of 200. Denmark has a great business perspective overall. The only part that I would question is, how would the…

Problem 3-2B Preparing adjusting and subsequent journal entries P1 P2 P3 P4 Natsu Company's annual accounting period ends on October 31. The following information concerns the adjusting entries that need to be recorded as of that date. Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Building; Accumulated Depreciation- Building; Salaries Payable; Unearned Revenue; Rent Revenue; Salaries Expense; Office Supplies Expense; Insurance Expense; and Depreciation Expense-Building. a. b. c. d. e. f. The Office Supplies account started the fiscal year with a $600 balance. During the fiscal year, the company purchased supplies for $4,570, which was added to the Office Supplies account. The supplies available at October 31 totaled $800. The Prepaid Insurance account had a $12,000 debit balance at October 31 before adjusting for the costs of any expired coverage for the fiscal year. An analysis of prepaid insurance shows…

Problem 3-1B Identifying adjusting entries with explanations P1 P2 P3 P4 For journal entries 1 through 12, indicate the explanation that most closely describes it. You can use explanations more than once. A. To record payment of a prepaid expense. B. To record this period's use of a prepaid expense. C. To record this period's depreciation expense. D. To record receipt of unearned revenue. E. To record this period's earning of prior unearned revenue. F. To record an accrued expense. G. To record payment of an accrued expense. H. To record an accrued revenue. I. To record receipt of accrued revenue. 1. Interest Receivable 3,500 7. Cash 1,500 Interest Revenue 3,500 Accounts Receivable (from services) 1,500 2. Salaries Payable 9,000 8. Salaries Expense 7,000 Cash 9,000 Salaries Payable 7,000 3. Depreciation Expense 8,000 9. Cash 1,000 Accumulated Depreciation. 8,000 Interest Receivable 1,000 4. Cash 9,000 10. Unearned Revenue 9,000 Prepaid Rent Cash 3,000 3,000 5. Insurance Expense 4,000…

Answer 2

Question

Chapter 14, Problem 1GI

To determine

State the reason for which the debt financing have a lower of cost than equity financing.

Expert Solution & Answer

Explanation of Solution

Debt Financing:

Debt financing refers to the act of raising money to meet the capital expenditures of the Company by selling debt instruments (bills, notes, and bond) to institutional investors or individuals. And then, the institutional investors or individuals become the creditors to whom the principal amount and interest on debt has to be repaid.

Reasons for which the debt financing have a lower of cost than equity financing are as follows:

Investment risk of debt is lower than stock and it offers considerably lower rate of return than stock.
Investors in equity securities usually generate a higher return on their investment.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 14, Problem 1GI

To determine

State the reason for which the debt financing have a lower of cost than equity financing.

Expert Solution & Answer

Explanation of Solution

Debt Financing:

Debt financing refers to the act of raising money to meet the capital expenditures of the Company by selling debt instruments (bills, notes, and bond) to institutional investors or individuals. And then, the institutional investors or individuals become the creditors to whom the principal amount and interest on debt has to be repaid.

Reasons for which the debt financing have a lower of cost than equity financing are as follows:

Investment risk of debt is lower than stock and it offers considerably lower rate of return than stock.
Investors in equity securities usually generate a higher return on their investment.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 14, Problem 1GI

To determine

State the reason for which the debt financing have a lower of cost than equity financing.

Expert Solution & Answer

Explanation of Solution

Debt Financing:

Debt financing refers to the act of raising money to meet the capital expenditures of the Company by selling debt instruments (bills, notes, and bond) to institutional investors or individuals. And then, the institutional investors or individuals become the creditors to whom the principal amount and interest on debt has to be repaid.

Reasons for which the debt financing have a lower of cost than equity financing are as follows:

Investment risk of debt is lower than stock and it offers considerably lower rate of return than stock.
Investors in equity securities usually generate a higher return on their investment.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 14, Problem 1GI

To determine

State the reason for which the debt financing have a lower of cost than equity financing.

Expert Solution & Answer

Explanation of Solution

Debt Financing:

Debt financing refers to the act of raising money to meet the capital expenditures of the Company by selling debt instruments (bills, notes, and bond) to institutional investors or individuals. And then, the institutional investors or individuals become the creditors to whom the principal amount and interest on debt has to be repaid.

Reasons for which the debt financing have a lower of cost than equity financing are as follows:

Investment risk of debt is lower than stock and it offers considerably lower rate of return than stock.
Investors in equity securities usually generate a higher return on their investment.

Answer 6

Chapter 14, Problem 1GI

To determine

State the reason for which the debt financing have a lower of cost than equity financing.

Expert Solution & Answer

Explanation of Solution

Debt Financing:

Debt financing refers to the act of raising money to meet the capital expenditures of the Company by selling debt instruments (bills, notes, and bond) to institutional investors or individuals. And then, the institutional investors or individuals become the creditors to whom the principal amount and interest on debt has to be repaid.

Reasons for which the debt financing have a lower of cost than equity financing are as follows:

Investment risk of debt is lower than stock and it offers considerably lower rate of return than stock.
Investors in equity securities usually generate a higher return on their investment.

Answer 7

Chapter 14, Problem 1GI

To determine

State the reason for which the debt financing have a lower of cost than equity financing.

Answer 8

Expert Solution & Answer

Explanation of Solution

Debt Financing:

Debt financing refers to the act of raising money to meet the capital expenditures of the Company by selling debt instruments (bills, notes, and bond) to institutional investors or individuals. And then, the institutional investors or individuals become the creditors to whom the principal amount and interest on debt has to be repaid.

Reasons for which the debt financing have a lower of cost than equity financing are as follows:

Investment risk of debt is lower than stock and it offers considerably lower rate of return than stock.
Investors in equity securities usually generate a higher return on their investment.