The weighted marginal cost of capital is _________function of total financing in dollars; the internal rate of return on individual projects is _________function of the total capital investment in dollars.
A) an increasing; an increasing
B) an increasing; a decreasing
C) a decreasing; an increasing
D) a decreasing; a decreasing

Question

Quizplus · Accepted Answer

The weighted marginal cost of capital is typically increasing because as a company takes on more debt or equity financing, the cost of that financing tends to increase. The internal rate of return on individual projects, on the other hand, tends to decrease as total capital investment increases because each dollar invested has a diminishing return. Therefore, the correct answer is an increasing weighted marginal cost of capital and a decreasing internal rate of return on individual projects, which is option B.

The Weighted Marginal Cost of Capital Is _________Function of Total