Although debt financing is usually the cheapest component of capital, it cannot be used to excess because

Question:

Although debt financing is usually the cheapest component of capital, it cannot be used to excess because
A) Interest rates may change.
B) The firm's stock price will increase and raise the financing.
C) The financial risk of the firm may increase and thus drive up the cost of all sources of financing.
D) Underwriting costs may change.

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...