The weighted marginal cost of capital is an increasing function of the level of total new financing.

Question

Quizplus · Accepted Answer

The weighted marginal cost of capital (WMCC) generally increases as the level of new financing increases because additional funding typically comes from higher cost sources such as new equity or debt. This is known as the "marginal cost of capital" concept, which suggests that the cost of capital for a company increases as it raises more capital.

The Weighted Marginal Cost of Capital Is an Increasing Function