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Companies often use debt when constructing their capital structure which have following main features:
- Lower cost
- Financial leverage
- Tax saving
- Retain control
1) A company may raise debt capital to built its optimum capital structure.
2) debt is less risky than equity is in the event of a liquidation, debt holders would receive their capital repayment before share holders.
3) Debt is also cheaper than equity from a company’s perspective is because of the different corporate tax
