Debt-equity comparisons considering wacc

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Reference no: EM1347480

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

Fundamental of Corporate Finance

a) Why is debt a comparatively cheaper form of finance than equity?

b) If debt is cheaper than equity, why do companies approach the equity markets?

c) How can one minimize WACC when there is a constraint on raising debt? if so, how?

d) What are the effects of a corporate tax on the WACC of a business?

e) Is minimizing WACC by having a largely debt-based capital structure a high-risk strategy, given the threat of bankruptcy in an overleveraged business? Explain your answer.

f) What are the extraneous factors which impact the ability of a business to radically alter its debt-equity mix?

Reference no: EM1347480

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