You will use the following information to answer three questions.

A local group of students is looking for investors for a new company that will develop mobile apps for the healthcare industry. The company requires $20 million in start-up funds. It can be capitalized with 100% equity financing or with 40 percent debt and 60 percent equity. EBIT is $750,000 and the company will pay taxes at a rate of 30 percent. Debt financing would bear an interest rate of 8 percent.

What are three factors that the investors should consider when deciding on the appropriate capital structure?