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    bettyboop13's Avatar
    bettyboop13 Posts: 6, Reputation: 1
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    #1

    Oct 2, 2008, 04:05 PM
    Increase in debt how affects the cost of capital
    How would an increase in debt affect the cost of capital and how could you identify the optimal cost of capital for an organization?
    CliffARobinson's Avatar
    CliffARobinson Posts: 1,416, Reputation: 101
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    #2

    Mar 10, 2012, 01:27 PM
    As debt increases, equity becomes riskier and the cost of capital becomes more expensive. Think of your own credit. The more debt you take on, the riskier you look to a Creditor, and the higher the interest rate they will charge for taking on the higher risk.
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