In large expansion programs, the increased riskiness and the floatation cost associated with project can cause ___________?
Correct answer: A. rise in marginal cost of capital
- A. rise in marginal cost of capital
- B. fall in marginal cost of capital
- C. rise in transaction cost of capital
- D. rise in transaction cost of capital
Explanation
Large expansion programs can increase perceived risk and flotation costs, raising the additional cost of obtaining capital. This produces a rise in the marginal cost of capital.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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