Accounting ~ HELP~ URGENT

A. Cheap and low risk as cost of debt (issuing bonds or borrowing fron banks) are lower than the cost of common equity (issuing shares are very expensive as we need to pay FLOTATION costs to the underwriters). Moreover, the risk of debt to shareholders are less as debtholders are not owners of the firm, shareholders can take risky projects to benefit themselves if those projects turn out to be profitable. On the other hand, if projects reported losses, the maximum losses borne by shareholders are their initial investments (limited companies)