The Cost of Capital is of great importance to senior management, the board of directors (also a part of senior management), and investors. Why, because it drives profitability long-term for the corporation and thus affects return on investment. Achieving a balance in the use of debt and equity financing of long-term capital investment becomes a major focus for senior management.

1. What are some of the major concerns that senior management faces in deciding on the mix of Debt to Equity?