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Impact of risk-free rate increase on cost of debt and cost of equity

Assume that the risk-free rate increases. What impact would this have on the cost of debt? What impact would it have on the cost of equity?

Solution Preview

If the risk free rate increases, both the cost of debt and cost of equity will increase.

Cost of Debt: Cost of debt will increase because the risk free rate ...

Solution Summary

This solution discusses what occurs to cost of debt and cost of equity if risk free rate increases. It's 127 words.

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