Which of the following is likely to lead to an increase in a firm's cost of debt financing?

Question

Quizplus · Accepted Answer

An increase in expected inflation would increase the cost of debt financing because lenders will demand a higher interest rate to offset the erosion of purchasing power caused by inflation. An increase in the riskiness of assets would also increase the cost of debt financing because lenders will demand a higher interest rate to compensate for the higher probability of default. An increase in the average age of debt financing could signal a lack of access to capital markets or financial distress, which could increase the perception of risk and raise the cost of debt financing. Therefore, all of the above factors would lead to an increase in a firm's cost of debt financing.

Which of the Following Is Likely to Lead to an Increase