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If a firm uses too much debt financing, why does the cost of capital rise?
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Am I answering this correctly? As a firm takes on more debt financing, risk of default and consequently bankruptcy increases. As the risk increases, a higher return on invetments is needed, which increases the overall cost of capital.
Cost of Equity Capital & Cost of Debt capital
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Hello everyone, Can you explain me why the cost of equity capital almost always or theoretically should exceed the cost of debt capital? Thanks, Tanka
As a firm initially substitutes debt for equity financing, what happens to the cost o
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As a firm initially substitutes debt for equity financing, what happens to the cost of
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