The WACC formula seems to imply that debt is cheaper than equity-that is, that a firm with

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The WACC formula seems to imply that debt is "cheaper" than equity-that is, that a firm with more debt could use a lower discount rate. Does this make sense? Explain briefly.

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Principles of Corporate Finance

ISBN: 978-0078034763

11th edition

Authors: Richard Brealey, Stewart Myers, Franklin Allen

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Question Posted: Nov 21, 2016 08:44 AM

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The WACC formula seems to imply that debt is cheaper than equity-that is, that a firm with

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No The more debt you use the higher rate of return equity investors will ...View the full answer

Principles of Corporate Finance

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