Ask Question
BusinessBusiness
20 December, 22:02

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

Is it a good idea or a bad idea?

+1
Answers (1)
  1. 21 December, 00:43
    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?
Find 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 you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Reduced order cycle time has become an important part of supply chain management since it can lead to lower inventory levels for customers, improved cash flow, lower current assets and accounts receivable. True/False
Answers (1)
True or false: the market for wheat does exhibit the two primary characteristics that define perfectly competitive markets.
Answers (1)
Casa Del Sol Property Development Company is refurbishing a 200-unit condominium complex at a cost of $1,875,000. It expects that this will lead to expected annual cash flows of $415,350 for the next seven years.
Answers (1)
Which process turn economic resources into goods and services? Distribution. Marketing. Promotion. Production
Answers (1)
Match the benefit with its detailed explanation
Answers (1)
New Questions in Business
ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance policy that included an 80 percent coinsurance clause. The building had a replacement cost of $1 million when it sustained a $40,000 loss.
Answers (1)
Which of the following are true? Select one or more: (a) The t-distribution is dependent on the sample size. (b) The t-distribution does not depend on the sample size.
Answers (1)
Santoyo Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: Hours Wait time 13.6 Process time 2.7 Inspection time 0.3 Move time 3.3 Queue time 7.0 The delivery cycle time was:
Answers (1)
During 2021, its first year of operations, Pave Construction provides services on account of $160,000. By the end of 2021, cash collections on these accounts total $110,000. Pave estimates that 25% of the uncollected accounts will be uncollectible.
Answers (1)
How often is interest earned from bonds usually paid to the bond holder? 1) Every month 2) Once per year 3) Twice per year 4) Every two years
Answers (1)
Home » Business » What is your reaction to Harriet's suggestion of using the cost of debt only? Is it a good idea or a bad idea?
Sign Up Forgot Password?