cost of debt, rd, is normally less than rs, so rd

Name: cost of debt, rd, is normally less than rs, so rd
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Quizplus · Accepted Answer

This is true because the cost of debt (rd) is the interest rate a company pays on its debt, which is usually lower than the cost of equity (rs), the rate of return required by shareholders to invest in the company. This is because debt holders have a relatively lower level of risk compared to equity holders, and their return is usually fixed.

Cost of Debt, Rd, Is Normally Less Than Rs, So