Which of the following mechanisms can aid in reducing a firm's cost of capital, all else equal?

Question

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A bond covenant that restricts the amount of dividends a firm can pay can make the debt less risky for lenders, thereby reducing the cost of debt financing. The use of convertible debt financing can also lower the cost of capital as it provides an option for investors to convert their debt into equity, which could potentially increase the value of their investment. Additionally, a greater percentage of equity financing can lead to a lower cost of capital as equity investors typically expect a higher return on their investment compared to lenders, but do not require regular interest payments or have the same level of priority in the event of bankruptcy. Bond covenants that restrict the amount of dividends a firm can pay and the use of convertible debt financing can both provide additional security and reduce the perceived risk to lenders, thereby reducing a firm's cost of capital. Additionally, a greater percentage of equity financing can also lower a firm's cost of capital by reducing the amount of debt in the firm's capital structure, which in turn reduces the firm's perceived financial risk.

Which of the Following Mechanisms Can Aid in Reducing a Firm's