Why would a firm use stock financing as opposed to debt financing? Stock financing allows the firm
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Question:
Why would a firm use stock financing as opposed to debt financing?
Stock financing allows the firm to avoid any legal, required cash payments to investors as would be required by debt financing.
Stock has a lower required rate of return by investors compared to debt.
Stock financing has tax advantages; debt financing does not.
Stock is cheaper for a firm to sell relative to debt.
Why would a firm have more than one-class of stock?
to allow a small group of investors to maintain voting control
to allow one-class of common stock to have priority over debt in the event of liquidation
to allow the payment of interest on one-class and dividend payments on the other class
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