If the rate of return on investment for a company is 15%, a situation of unfavourable financial leverage will be said to arise when the rate of interest payable on debt capital is

More than 15 %

The correct answer is Option 1: More than 15%

In the context of financial leverage, when the rate of return on investment (ROI) is higher than the rate of interest payable on debt capital, it is considered favorable leverage. Conversely, when the rate of return on investment is lower than the rate of interest payable on debt capital, it is considered unfavorable leverage. Given that the rate of return on investment for the company is 15%, unfavorable financial leverage will occur when the rate of interest payable on debt capital is: Option 1: More than 15%

"The proportion of debt in the overall capital is also called financial leverage. Financial leverage is computed as D/E or D/(D+E) when D is the Debt and E is the Equity. As the financial leverage increases, the cost of funds declines because of increased use of cheaper debt but the financial risk increases. If a company borrows Rs. 100 at 10% interest p.a., and earns a return of 12%, the leverage will be considered favourable. Unfavourable or negative leverage occurs when the firm does not earn as much as the cost of debt."