Cost of equity (Ke) is always higher than cost of debt (kd), do u agree? if yes then why?

Not always but mostly Cost of Equity remains higher than the Cost of Debt. 

Reason:

Debt is secured against securities resulting less risk of loss. Less risk brings less returns, hence lesser cost.

On the otherhand risk of loss for the equity holders remains higher and even not secured against any security. Against higer risk equity holders expect higher returns. Hence higher cost of Equity.

The cost of equity capital is higher than that of debt because of greater uncertainty of receiving dividends and repayment of principal at the end.

cuz

1)debt is tax deductable

2)debt is secured against asset

3)risks faced by shareholder are both business and financial risk,while debt holder faces only business risk

4)DIvident received by SH maybe uncertain while debtholder received fix interest

5)in case of liquadation of company SH will receive  only what is left by Debt holder.

thses are mail reason why Cost of equity is greater than cost of debt.

No, its not always true. Kd can be greater than Ke.

e.g. Debenture ROI is12% Tax rate30%, effective kd =8.4%.

Divident= .30 $ and MRP of share is10$, growth rate =1 %, ke=4%. 

Yes.I agree.

Cost of equity involves the expenses incurred to raise the equity.This involves various stages from incurring for printing of offer document to reaching of the the equity in the bank account like audit fee ,advicate fee.In case of not reaching of minimum subscription,the entire funds collected will have to be refunded.Expenses so  incurred become sunk.Much time lag from this end to that end.

To raise debt, chosen bank or financial instituion can be dealt with directly.Cost of debt should be much less comparatively .Time lag is much less.

Not in all cases but mostly Cost of Equity remains higher than the Cost of Debt because in the case of bankruptcy, debt holders are repaid before equity holders therefore decreased risk for debt. Debt is collateralized by the assets of the firm, equity is not.

Y es i agree cost of euity is alway higher than const of debt - means ke is always equited the present value of market price and growth rate...

Kd is contractual interest rate  further adjusted only tax liability the market price alway lower value e.i.discount, par, floting rate. 

kd12%, tax rate30% , efective =15%  (1-t) =10.5%

ke , dividend=10, mrp=100,growth rate=1%, effective =10/100+1%=11 %.

So ke alway greater greater than kd cause ke equited every time market price ang growth rate....

Let us ignor the cost of  raising because both  Kd and Ke need such cost. Kd get return before tax but ke get return after tax so Ke is always costlier than Kd. let me explain by example

''Higher the risk higher will be the profit '' IF  EQUITY HOLDER TAKE RISK SUCH AS OPERATION RISK , FINANCIAL RISK AND PAID TAX IN SUCH SITUATION THEY WANT HIGHER RETURN.

Example: INCOME STATEMENT

1.    SALES  - VERIABLE COST=CONTRIBUTION

 2.   CONTRIBUTION-FIXED COST=EBIT

3.    EBIT-INTEREST= EBT

4.  EBT-TAX=EAT (IT CAN BE FURTHER APPROPRIATED)

IN INCOME STATEMENT Kd Get earning before tax(in other word tax deduction in interest by company) but  Ke get profit after tax  so it is costlier.

Cost of equity is usually kept higher of Cost of debt but not always.The more the cost of equity will be the lender will presume it more secure in advancing loan to the borrowers.

not always because there are company have dept balance mort than equity specialy in the company which have high loses , that requir to take loans and other dept to cover the loses and continue in its work in market

Let us Differentiate between TWO IMPORTANT ISSUES;

1- The Higher Cost of financing. 

2- The Riskier Financing Method

In fact most for the first point the most cost could be for the Equity, unless the perception of the shareholders that their money will not expect dividends for a first two years until the new project is getting stronger. And so if we calculate the Ke will find that Ke =/ (dividends) +5% growth rate   for example. If we have zero dividends the Ke =5%

Second,

The riskier is Kd cost of debt, as professionally if we have not enough cash for dividends we will not pay dividends...but if we have no cash, we still should pay interest otherwise will loose our assets and business. that is the difference. 

Companies are never% certain what their earnings will amount to in the future (although they can make reasonable estimates), and the more uncertain their future earnings, the more risk presented. Thus, companies in very stable industries with consistent cash flows generally make heavier use of debt than companies in risky industries or companies who are very small and just beginning operations. New businesses with high uncertainty may have a difficult time obtaining debt financing, and thus finance their operations largely through equity

Thank you