Cost of Equity Share Capital is more than cost of Debt because :

Cost of equity share capital refers to the rate of return which is paid to the shareholders for their investment, to compensate for the risk they undertake.

Cost of debt is the amount of interest rate a company has to pay on its debts i.e. loans, bonds, credit card interests, etc.

Cost of Equity share is usually more than cost of Debt because:

• The debt is secured against the securities and has a fixed return on interest resulting in less risk.
• In the cost of equity share capital, there is the uncertainty of dividend and repayment of capital.
• Thus, equity shares are considered as of high risk than debts. 

Therefore, the Cost of Equity Share Capital is more than the cost of Debt because Equity shares have high risk than debts.

Cost of Equity Share (Ke) Formula For Dividend Companies: Ke = DPS/MPS + r,

Where, DPS = Dividend Per Share, MPS = Market Price per Share, r = Growth rate of Dividend.

Cost of Debt (Kd) Formula:

• Pre-tax formula: Kd = (Total Interest Cost Occurred / Total Debt)*100
• Post-tax formula: Kd = [(Total Interest Cost Occurred * (1- Effective tax rate) / Total Debt]*10