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Debt is considered the cheapest source partly because interest is:
ATax deductible
BNever repayable
CPaid in shares
DFixed by law
Answer & Solution
Correct answer: A. Tax deductible
1. Lenders take less risk than shareholders.
2. Interest is a deductible expense for tax.
3. Dividends come out of after-tax profit.
_Source: NCERT Class 12 Business Studies Part II, Chapter 9, Financial Management._
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