Why is debt a comparatively cheaper form of finance than equity and if debt is cheaper than equity, why do companies approach the equity markets?

Related BrainMass Solutions

• Determining: The Debt Equity Mox

  Why is debt a comparatively cheaper form of finance than equity? If debt is cheaper than equity, why do companies approach the equity markets? Can one minimize WACC when there is a constraint on raising debt? If so, how?

• I need your help in summarizing Debt Equity Mix

  If debt is cheaper than equity, why do companies approach the equity markets? Can one minimize WACC when ther is a constraint on raising debt? If so, how? What are the effects of a corporate tax on the WACC of a business?

• Determining the Debt-Equity Mix

  49145 Determining the Debt-Equity Mix Can someone eloborate and, if necessary, correct my responses to the questions below? A) Why is debt a comparatively cheaper form of finance than equity?

• Debt-equity comparisons considering WACC, corporate tax, leverage, cost of debt

  Second, interest paid is tax deductible to the company; and a lower tax bill effectively creates cash. b) If debt is cheaper than equity, why do companies approach the equity markets?

• Debt offerings are more common than equity offerings

  90041 Why do you think debt offerings are more common than equity offerings? Why do you think debt offerings are more common than equity offerings and typically much larger as well?

• Inventory Turnover, Flotations Costs, and Equity Financing

  Equity would result in the loss of control by the current owners of equity, which is why it is less preferred than debt.

• Cost of equity

  The main reason for not using equity to finance a company totally, is that debt financing might be cheaper to utilize when expected rate of return is much higher than the cost of debt.

• Cost of capital

  In the case of Cape Cod the after tax cost of debt is greater than the cost of equity and so if the proportion of debt is increased, the WACC will increase and more of expensive debt is used instead of cheaper equity. 3.

• Debt & Equity Offerings / Cost of Capital & Decision Making

  DEBT VS EQUITY #2 Why do you think debt offerings are more common than equity offerings and typically much larger as well?