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<p style="text-align:justify;"> <strong>(a) Face value of debentures is more than face value of shares,</strong></p> <p style="text-align:justify;"><strong>(b) Equity shares have higher risk than debt, </strong></p> <p style="text-align:justify;"><strong>(c) Equity shares are easily saleable,</strong></p> <p style="text-align:justify;"><strong>(d) All of the three above.</strong></p>
B
Answer B.
Equity shares have high risk more than debt.
Because dividend is only from the profit where as interest has to pay whether you made profit or loss.
Regards,
Joshi Mathew
CIA #1036906
Option B is appropriate answer.
Right answer is option B)
Since the required return on equity is always higher than the cost of debt financing, the cost of equity shares is higher.
b
Cost of equity is more than cost of debt because of risk and why would a entrepreneur put money if he is not getting return above risk free rate.
b
Answer B correct answer
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