Because issuing ordinary equity entails less risk to the firm,it is always less expensive than borrowing.

Question

Quizplus · Accepted Answer

This statement is false. Issuing equity is not always less expensive than borrowing as it depends on various factors such as current market conditions, company's creditworthiness, and investor demand. In some cases, borrowing may be cheaper due to lower interest rates or tax benefits associated with debt financing.

Because Issuing Ordinary Equity Entails Less Risk to the Firm,it