Why debentures are cheap soures of finance

1.	Why debentures are cheap soures of finance
Answer» \tThe cost of debt capital, represented by debentures is lower than the cost of preference or equity capital. This is because the interest on debentures is tax deductible and hence it helps in increasing the rate of return. Thus debenture issue is a cheaper source of finance.\tThe fixed monetary payment associated with debentures is interest. This fixed return appeals to many investors, since they are not affected by the fluctuating fortunes of the company.

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