Which of the following is least likely to lead to a break point in the marginal cost of capital schedule?
A)an increase in the required return demanded by investors for a new bond issue.
B)increased flotation costs associated with seasoned equity offerings.
C)decreased liquidity in money markets leading to lower selling prices for commercial paper.
D)using retained earnings to fund new projects for the firm.
E)issuing preferred stock to institutional investors.

Question

Quizplus · Accepted Answer

Using retained earnings to fund new projects for the firm is the least likely to lead to a break point in the marginal cost of capital schedule, as retained earnings do not involve any external financing and do not affect the firm's cost of capital. The other options all involve external financing and can affect the cost of capital through changes in required returns, flotation costs, liquidity, or investor preferences.

Which of the Following Is Least Likely to Lead to a Break