Cost of equity > Cost of debt Reason: When u issue debt, for
example in the form of bonds, u have to pay bondholders interest.
This interest is tax deductible. On the other hand, when u issue
equity, i.e. stocks, u pay dividends. This dividend is taxed as
corporate income. Because of the ability of debt to escape taxation
vis-a-vis equity, cost of debt is lower than cost of equity. In
fact, this is called a debt tax shield.