For a given company, the:

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CThe cost of debt is typically less than the cost of equity because debt payments are tax-deductible, reducing the effective cost of debt to the company. Additionally, debt holders face lower risk than equity holders since they have priority in claims over the company's assets and earnings, which justifies a lower return expectation. The weighted average cost of capital (WACC) is a blend of the cost of debt and the cost of equity, weighted by their respective proportions in the company's capital structure. Since debt is cheaper than equity and has a tax shield benefit, incorporating debt into the capital structure lowers the WACC below the cost of equity.

For a Given Company, The