1. Consider a firm that is interested in raising funds through debt or equity. One large benefit of using equity to finance a firm is that no required interest is paid. This is beneficial for two reasons: first, this leaves more for the owners; second, in the case of unexpectedly low earnings it may not be possible to pay interest, which could result in the debtors foreclosing on the business. TFU and explain: Given the choice, it is always better to raise funds through equity. (7)