Explain how -cost of debt- affects the choice of capital structure of a company-

Question

Toppr Admin · Accepted Answer

Cost of debt A firm-x2019-s ability to borrow at a lower rate of interest increases its capacity to employ higher debt- Thus- more debt can be used if debt can be raised at lower rate-

Explain how 'cost of debt' affects the choice of capital structure of a company?

Cost of debt A firm’s ability to borrow at a lower rate of interest increases its capacity to employ higher debt. Thus, more debt can be used if debt can be raised at lower rate.