Revisiting Cost of Capital: When Debt Becomes More Expensive Than Equity - A Case Study of Kingfisher Airlines

Armaan Ahluwalia, Anant Bokade

Abstract: This paper examines whether the cost of debt is always lower than the cost of equity by analyzing standard financial models and applying them to real-world scenarios, including the downfall of Kingfisher Airlines. Using both mathematical reasoning and empirical evidence, it demonstrates that in periods of extreme leverage and financial distress, the cost of debt can exceed that of equity. The paper also explores how credit ratings, tax shields, and market conditions influence capital costs and affect a firm's weighted average cost of capital (WACC).

Keywords: cost of debt, cost of equity, WACC, financial distress, Kingfisher Airlines

How to Cite?: Armaan Ahluwalia, Anant Bokade, "Revisiting Cost of Capital: When Debt Becomes More Expensive Than Equity - A Case Study of Kingfisher Airlines", Volume 15 Issue 2, February 2026, International Journal of Science and Research (IJSR), Pages: 82-84, https://www.ijsr.net/getabstract.php?paperid=SR26201171009, DOI: https://dx.doi.org/10.21275/SR26201171009

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