The relative inexpensiveness of debt capital is due to the fact that the lenders take the least risk among the long-term contributors of capital.

Question

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Debt capital is considered less risky for lenders as they have a legal claim on assets in case of default, and they receive regular interest payments. Hence, lenders are willing to offer debt capital at lower interest rates, making it relatively inexpensive.

The Relative Inexpensiveness of Debt Capital Is Due to the Fact