Question
Explain the following as factors affecting the choice of capital structure:
Cost of equity
Solution
Cost of equity: In terms of dividend payments, higher the cost of equity, lower is its proportion in total capital.
Use of debt increases ⇒ Financial risk increases ⇒ Expectation of rate of return increases ⇒ Difficult to opt for ⇒ Equity cost increases
Is there an error in this question or solution?
Solution Explain the Following as Factors Affecting Choice of Capital Structure: Cost of Equity Concept: Concept of Capital Structure.
