Cost of Equity Share Capital is more than cost of debt because ........

Principles of Accounting & Financial Management Cost of capital

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Cost of Equity Share Capital is more than cost of debt because:

Equity shares are highly liquid.

Equity shares have higher risk than debt,

Market price of equity is highly volatile

Face value of equity is less than debentures.

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Explanation:

Answer :- Equity shares have higher risk than debt,

Cost of Equity share is usually more than cost of Debt because: The debt is secured against the securities and has a fixed return on interest resulting in less risk. In the cost of equity share capital, there is the uncertainty of dividend and repayment of capital.