Why would equity cost more than debt?

Why would equity cost more than debt?

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Expert Solution

The Cost of equity is more then the cost of debt because the common shareholders are the owners of the company and they are highest risk takers as the capital is at stake while the debtholders get fixed interest payment and they are the least risk taker in the organization. Therefore, the cost of equity is higher as they demand higher return in comparison to risk.

jeff jeffy answered 1 year ago

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