The risk of debt capital is less than that of other long-term contributors of capital because
A) it has far stronger legal pressure against the company to make payment than do preferred and common stockholders.
B) it has a higher priority of claim against any earnings or assets available for payment.
C) the tax-deductibility of interest payments lowers the debt cost to the firm substantially.
D) of all of the above.

Question

Quizplus · Accepted Answer

Debt capital is less risky because it has legal pressure for payment, higher priority in claims, and tax-deductible interest, making it cheaper for firms.

The Risk of Debt Capital Is Less Than That of Other