Q6. a) In the real business world, what are the benefits of using debt capital to a firm (please
name at least 2 benefits)? [40 Marks]
Q6. b) In the real business world, what are the costs of using debt capital to a firm (please
name at least 2 costs)? [40 Marks]
Q6. c) Please discuss how a firm’s cost of capital will change with its debt ratio generally and
why. [20 Marks]
Note 1. For questions requiring calculation, answers without appropriate reasonings
or supporting calculation or will get ZERO.
Note 2. Keep only TWO digits in all calculation steps.