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    Question

    Debt is considered cheaper than equity

    because:
    A Interest is paid after tax Correct Answer Incorrect Answer
    B Interest is tax-deductible Correct Answer Incorrect Answer
    C Interests are fixed Correct Answer Incorrect Answer
    D Debt holders have voting rights Correct Answer Incorrect Answer

    Solution

    Interest on debt is an expense and reduces taxable income, lowering the effective cost of capital, making debt cheaper than equity.

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