In what kind of scenario would debt be much cheaper for the company overall? When might they end up paying more because they used debt?
In general debt is much cheaper for the company overall because of the following reasons-
They might end up paying more because they used debt when the company becomes over-leveraged or borrow more debt than a certain level. The cost of raising additional debt sometime become more costly as borrowing becomes more and more expensive. The initial lenders have first claim on the company's assets while the subsequent lenders will have residual claim therefore they charge more interest as the lending becomes riskier due to repaying capacity of the company.
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