Cost of Capital and Equity Markets Name Course: FIN501 MOD4 Discussion Cost of Capital Instructor Date The capital structure of a business integrates the debt, equity financing mix, and this then affects the business and financial risk (Pearson Learning, 2014). The financial risk has a direct impact on equity financing with variability in earnings given the use of securities with a fixed rate of return (Pearson Learning, 2014). At the same time, increasing the level of debt leaves a firm with less income to distribute to the stock brokers since there is a higher level of principal and interest payments (Pearson Learning, 2014). The financial risk is also associated with the likelihood of insolvency to shareholders when the financial risk is at a high level to the extent that
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