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Cost of Capital: Debt or Equity

Given the current state of the economy and our financial markets, is it more desirable for firms to raise money through debt or through equity at this time? Corporations almost always need more funds and capital in order to keep running, so not raising funds is not an option. So is debt or equity the best option at this time for a typical corporation given the difficulties of our financial markets?

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Debt represents borrowed amount and it involves payment of interest. Equity represents ownership in the organization.
Given the current state it is more ...

Solution Summary

This solution discusses the benefits of the debt-financing option in a recession in 104 words.