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

Question

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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.

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Students have asked these similar questions

Bradford Enterprises sells two products, blue pens and green notebooks. Bradford predicts that it will sell 3,200 blue pens and 900 green notebooks in the next period. The unit contribution margins for blue pens and green notebooks are $2.80 and $4.20, respectively. What is the weighted average unit contribution margin?

Please provide the correct answer to this financial accounting problem using accurate calculations.

Provide Answer

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.

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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.

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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.

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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.