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ANSWERS TO REVIEW QUESTIONS 7-1 Equity capital is permanent capital representing ownership, while debt capital represents a loan that must be repaid at some future date. The holders of equity capital receive a claim on the income and assets of the firm that is secondary to the claims of the firms creditors. Suppliers of debt must receive all interest owed prior to any distribution to equity holders, and in liquidation all unpaid debts must be satisfied prior to any distribution to the firms owners. Equity capital is perpetual while debt has a specified maturity date. Both income from deb