Ask Question
19 July, 00:41

What is your reaction to Harriet's suggestion of using the cost of debt only?

Is it a good idea or a bad idea?

+2
Answers (1)
  1. 19 July, 03:57
    0
    No, it is a bad idea to use only the cost of debt

    Explanation:

    Only using the cost of debt, is not a good idea because too much amount of borrowing could lose the confidence of the investors and it could lead to the uncertainty in the future cash flows.

    Suppliers might be worried regarding the financial situation and lead to the supply disruption. Though, the debt might save the tax expenses, which could lead to the negative cash flow.

    When the company does not have adequate amount of cash at hand, it could cause many disruptions of financial. WACC (Weighted Average Cost of Capital) rates need to be used as the capital costs as it weigh the used capital cost and the used debt.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “What is your reaction to Harriet's suggestion of using the cost of debt only? Is it a good idea or a bad idea? ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers