The cost of equity is less than the cost of debt

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Reference no: EM131010300

Suppose Mr. Thomas, president of your company, has hired you to determine the firm's cost of debt and the cost of equity capital. Based on his analysis, Mr. Thomas is recommending that the company increase its use of equity financing because "debt costs 12.5%, but equity only costs 10%." Do you agree that the cost of equity is less than the cost of debt? What is missing in the comparison?

Reference no: EM131010300

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