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Debt is cheaper than Equity

Posted on 2/25/15 at 2:41 pm
Posted by euphemus
Member since Mar 2014
536 posts
Posted on 2/25/15 at 2:41 pm
Explain.
Posted by jbgleason
Bailed out of BTR to God's Country
Member since Mar 2012
18893 posts
Posted on 2/25/15 at 2:43 pm to
If only there were a Money Board...
Posted by iAmBatman
The Batcave
Member since Mar 2011
12382 posts
Posted on 2/25/15 at 2:43 pm to
Money board
Posted by LNCHBOX
70448
Member since Jun 2009
84053 posts
Posted on 2/25/15 at 2:44 pm to
Inflation is higher than interest rates. That was tough.
Posted by euphemus
Member since Mar 2014
536 posts
Posted on 2/25/15 at 2:46 pm to
Can you explain that in terms of a balance sheet of a company?
Posted by iAmBatman
The Batcave
Member since Mar 2011
12382 posts
Posted on 2/25/15 at 2:48 pm to
Posted by Shadowlink
The Shadows
Member since Apr 2014
1434 posts
Posted on 2/25/15 at 2:51 pm to
quote:

Inflation is higher than interest rates. That was tough.
Plus the tax breaks for having debt.
Posted by southernelite
Dallas
Member since Sep 2009
53140 posts
Posted on 2/25/15 at 3:09 pm to
Need help with your intro finance homework, eh?
Posted by LNCHBOX
70448
Member since Jun 2009
84053 posts
Posted on 2/25/15 at 3:22 pm to
quote:

Can you explain that in terms of a balance sheet of a company?



Posted by Cmlsu5618
Destin, FL
Member since Sep 2010
3763 posts
Posted on 2/25/15 at 4:20 pm to
Weighted Average Cost of Capital - Khan Academy

Watch the first video.


Edit: Debt is not always cheaper than equity. In this environment, it is. Companies are issuing debt instruments because relative interest rates are low. This is why companies like Apple are issuing debt to pay shareholders a dividend, while retaining the equity in their cash to make investments.
This post was edited on 2/25/15 at 4:25 pm
Posted by euphemus
Member since Mar 2014
536 posts
Posted on 2/25/15 at 4:32 pm to
Thanks. I am reading up on leveraged recap and this came up. I love Khan Academy videos by the way. Dude is legit. Great NOLA export.
Posted by lsufan_26
Member since Feb 2004
12559 posts
Posted on 2/25/15 at 7:21 pm to
quote:

Debt is cheaper than Equity

Explain.

You buy 3 vowels with equity. You only buy one with debt.
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