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Answer: a less expensive financing option for the issuer.
**Explanation:** Debt is often a cheaper source of financing for corporations compared to equity because the cost of debt (interest payments) is typically lower than the cost of equity (dividends and capital gains). Additionally, debt does not dilute ownership or voting rights, making it an attractive option for companies with predictable cash flows. However, debt increases financial leverage and risk for the issuer, as failure to meet obligations can lead to legal consequences such as bankruptcy. In contrast, equity represents a more permanent source of capital but involves sharing residual value and control with shareholders.
Author: LeetQuiz Editorial Team
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From the perspective of a corporate issuer, which of the following is a benefit of issuing debt rather than equity as a source of capital? Debt is most likely:
A
a less expensive financing option for the issuer.
B
a lower-risk financing option for the issuer.
C
a more enduring source of capital for the issuer.
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