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Commerce · Q5

Business Finance

Graduate and Post Graduate · Commerce · question 5

Q5

Which of the following is an implicit cost of increasing proportion of debt of a company?

A.
PE ratio of the company would increase
B.
Rate of return of the company would decrease
C.
Tax shield would not be available on new debts
D.
Equity shareholders would demand higher return
Answer

Answer: Option D

Solution

Answer: Option D
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