It has been suggested that one disadvantage of common stock financing is that share prices tend to

Question:

It has been suggested that one disadvantage of common stock financing is that share prices tend to decline in recessions, thereby increasing the cost of capital and deterring investment. Discuss this view. Is it an argument for greater use of debt financing?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...